CAS Exam 7 Spring 2013, Question 6
Study guide: Exam 7
Given the following information regarding a book of retrospectively rated policies:
| Retrospective Adjustment | First | Second | Third |
|---|---|---|---|
| Loss Age | 18 | 30 | 42 |
| Premium Age | 27 | 39 | 51 |
| Loss Capping Ratio | 80% | 50% | 70% |
| LDF to Ultimate | 1.800 | 1.150 | 1.050 |
- Tax multiplier: 1.04
- Loss conversion factor: 1.15
- Total basic premium: $12,456,000
- Total standard premium: $54,309,000
- Expected loss ratio to standard premium: 75%
Part a (1 point)
Calculate the PDLD ratio as of the first retrospective adjustment.
Part b (0.5 points)
Calculate the PDLD ratio as of the second retrospective adjustment.
Part c (0.5 points)
Calculate the PDLD ratio as of the third retrospective adjustment.
Part d (0.75 points)
Based on the results of parts a., b. and c. above, discuss the reasonableness of the loss capping ratios shown above.
Answer this question and see the worked solution