CAS Exam 7 Spring 2012, Question 2
Study guide: Exam 7
Given the following information as of December 31, 2011:
| Accident Year | On-level Premiums | Cumulative Paid Loss | Fitted Paid Emergence Pattern |
|---|---|---|---|
| 2008 | $1,300,000 | $600,000 | 70% |
| 2009 | 1,200,000 | 350,000 | 45% |
| 2010 | 1,200,000 | 200,000 | 25% |
| 2011 | 1,300,000 | 75,000 | 10% |
- Parameter standard deviation: 300,000
- Process variance/mean scale parameter (
\sigma^2): 10,000
Part a (2 points)
Estimate the total loss reserve using the Cape Cod method.
Part b (0.5 points)
Calculate the process standard deviation of the reserve estimate in part a. above.
Part c (1 point)
Calculate the total standard deviation and the coefficient of variation of the reserve estimate.
Answer this question and see the worked solution
Concepts tested
- Cape Cod Method
- Maximum Likelihood Estimation
- Coefficient of Variation
- Process Risk
- Growth Curve
- Prediction Error