CAS Exam 7 Spring 2015, Question 12
Study guide: Exam 7
Given the following ground-up information for insurance claims subject to a single excess-of-loss reinsurance treaty as of December 31, 2014:
| Claim Number | Occurrence Number | Date of Loss | Reported ALAE | Reported Loss | Total Reported Loss and ALAE |
|---|---|---|---|---|---|
| 1 | 1 | Feb 29, 2013 (as printed) | $12,000 | $80,000 | $92,000 |
| 2 | 2 | May 28, 2013 | 18,000 | 145,000 | 163,000 |
| 3 | 3 | Sep 5, 2013 | 8,000 | 70,000 | 78,000 |
| 4 | 3 | Sep 5, 2013 | 3,250 | 30,000 | 33,250 |
| 5 | 4 | Jan 24, 2014 | 9,000 | 90,000 | 99,000 |
| 6 | 5 | Mar 7, 2014 | 20,000 | 225,000 | 245,000 |
| 7 | 6 | Oct 18, 2014 | 3,750 | 55,000 | 58,750 |
| Accident Year | Historical Per-Occurrence Retention |
|---|---|
| Jan 1, 2013 – Dec 31, 2013 | $150,000 |
| Jan 1, 2014 – Dec 31, 2014 | 200,000 |
- The historical pre-occurrence (as printed) retentions apply to combined loss and ALAE.
- The reinsurance treaty stipulates that the reinsurer must be notified of any occurrences whose reported loss and ALAE reaches 50% of the retention.
Demonstrate how the data above indicates the presence of two aspects of reinsurance loss reserving that make it somewhat more difficult than primary loss reserving.
Part a (1 point)
Answer this question and see the worked solution