CAS Exam 6C Spring 2016, Question 15
Study guide: Exam 6C
The following information is available for a Canadian property and casualty insurance company as at December 31, 2015. The company began operations on January 1, 2015. All amounts are in thousands of dollars ($000s).
| Accident Year | Net Paid Loss | Net Incurred Loss | Net Ultimate Loss |
|---|---|---|---|
| 2015 | 2,000 | 3,500 | 10,000 |
| Discount Rate | Claims Development MfAD | Reinsurance Rate MfAD | |
|---|---|---|---|
| Net | 5.00% | 6.00% | 4.00% |
Cumulative accident year payment pattern (net layer only):
- Percentage paid by 12 months = 20%
- Percentage paid by 24 months = 30%
- Percentage paid by 36 months = 50%
- Percentage paid by 48 months = 75%
- Percentage paid by 60 months = 100%
Assume that all payments are made in the middle of the year.
The gross discounted present value of claims liabilities (excluding PfADs) as at December 31, 2015 is 18,121.
Total net unpaid claims and adjustment expenses on an actuarial discounted basis as at December 31, 2015 are 8,180.
Part a (2 points)
Calculate the net Investment PfAD at December 31, 2015.
Part b (0.5 points)
Identify two considerations in calculating the portfolio yield.
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