CAS Exam 7 Spring 2015, Question 3
Study guide: Exam 7
Given the following information:
Cumulative Reported Claims ($000)
| Accident Year | As of 12 Months | As of 24 Months |
|---|---|---|
| 2008 | 1,700 | 3,600 |
| 2009 | 2,300 | 3,200 |
| 2010 | 1,200 | 1,700 |
| 2011 | 500 | 2,600 |
| 2012 | 2,600 | 3,000 |
| 2013 | 700 | 2,100 |
Part a (1.5 points)
Calculate the weighted residuals for reported claims as of 24 months following Mack's methodology. Create a scatter plot of these residuals against cumulative reported claims as of 12 months.
Part b (0.75 points)
Identify which one of the three assumptions specified by Mack as underlying the chain ladder method can be tested by reviewing the scatter plot created in part a. above, and discuss whether the assumption has been violated.
Answer this question and see the worked solution