CAS Exam 7 Spring 2013, Question 3
Study guide: Exam 7
Given the following information:
| Accident Year | Cumulative Paid Loss 12 ($000) | Cumulative Paid Loss 24 ($000) | Cumulative Paid Loss 36 ($000) |
|---|---|---|---|
| 2010 | 2,750 | 4,250 | 5,100 |
| 2011 | 2,700 | 4,300 | |
| 2012 | 2,900 |
The expected accident year loss emergence pattern (growth function) is approximated by a Weibull function of the form:
G(x \mid \omega, \theta) = 1 - \exp\left(-(x/\theta)^{\omega}\right)
Parameter estimates are: \omega = 1.5 and \theta = 20
Part a (3 points)
Calculate the process standard deviation of the reserve estimate for accident years 2010 through 2012 using the LDF method.
Part b (2 points)
Graph the normalized residuals plotted against the increment age of loss emergence. Based on your graphical results, discuss the appropriateness of the Weibull model above.
Answer this question and see the worked solution