CAS Exam 7 Spring 2012, Question 1
Study guide: Exam 7
Given the following information for accident year 2011 as of December 31, 2011:
- Accident year 2011 paid loss: $700,000
- 2011 earned premium: $3,000,000
- Initial expected loss ratio: 62.5%
- 12-24 month paid link ratio: 1.50
- 12-ultimate cumulative paid LDF: 2.50
Part a (1.25 points)
Calculate accident year 2011 ultimate loss estimates as of December 31, 2011 using each of the following three methods:
- i. Chain ladder
- ii. Bornhuetter-Ferguson
- iii. Benktander
Part b (1.5 points)
Determine the accident year 2011 incremental paid loss in 2012 that would result in the Benktander ultimate loss estimate being $50,000 greater than the Bornhuetter-Ferguson ultimate loss estimate for accident year 2011, as of December 31, 2012. Assume all selected development factors remain the same.
Answer this question and see the worked solution