CAS Exam 7 Spring 2013, Question 4
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) | Cumulative Paid Loss 48 ($000) |
|---|---|---|---|---|
| 2009 | 5,751 | 10,640 | 11,491 | 12,181 |
| 2010 | 5,528 | 9,287 | 10,680 | |
| 2011 | 4,120 | 7,004 | ||
| 2012 | 5,304 |
Calculated Ultimate Loss ($000)
| Accident Year | Bornhuetter-Ferguson Ultimate | Benktander Ultimate |
|---|---|---|
| 2009 | 12,181 | 12,181 |
| 2010 | 11,246 | 11,316 |
| 2011 | 8,428 | 8,204 |
| 2012 | 10,403 | 10,609 |
Part a (1.5 points)
Calculate the 24-month-to-ultimate cumulative development factor that would result in the ultimate loss estimates shown above.
Part b (0.5 points)
For accident year 2011, suppose that the Bornhuetter-Ferguson method is performed over multiple iterations. Deduce the ultimate loss estimate that will be produced as the number of iterations approaches infinity.
Answer this question and see the worked solution