CAS Exam 7 Spring 2013, Question 7
Study guide: Exam 7
The following cumulative reported loss triangle is to be used in a bootstrap process, by building a generalized linear model (GLM) based on incremental loss.
| Accident Year | Cumulative Reported Loss 12 | Cumulative Reported Loss 24 | Cumulative Reported Loss 36 |
|---|---|---|---|
| 2010 | $200,000 | 225,000 | 250,000 |
| 2011 | 300,000 | 325,000 | |
| 2012 | 450,000 |
Part a (0.75 points)
Construct a log-link triangle that can be used to solve for the GLM parameters.
Part b (0.5 points)
Now assume that the 2010 cumulative reported loss value at 24 months is $170,000 instead of $225,000 and that all other cumulative values stay the same. Briefly explain the obstacles to setting up and solving a GLM bootstrap model for this revised triangle.
Part c (0.75 points)
For the revised triangle described in part b. above, construct a log-link triangle that can be used to solve for the parameters of the GLM and briefly describe how to then modify the GLM's fitted values.
Answer this question and see the worked solution