CAS Exam 7 Spring 2015, Question 9
Study guide: Exam 7
Given the following portfolio characteristics and selected coefficients of variation (CoV):
| Portfolio | Portfolio Size ($000,000) | Length of Claim Run Off (in years) | Selected CoV: Outstanding Claim Liability | Selected CoV: Premium Liability |
|---|---|---|---|---|
| A | 50 | 20 | 5.5% | y |
| B | 300 | 20 | x |
7.0% |
| C | 300 | 5 | 0.5% | 0.3% |
- Event risk is not material.
Part a (0.75 points)
Select a value for x and explain why it is reasonable within the scope of internally benchmarking independent risk.
Part b (0.75 points)
Select a value for y and explain why it is reasonable within the scope of internally benchmarking independent risk.
Answer this question and see the worked solution