CAS Exam 7 Spring 2016, Question 12
Study guide: Exam 7
Part a (1 point)
When there are negative incremental values in loss development data, the log-link function used in the GLM framework will fail to yield values usable to parameterize the model. Describe two modifications to the log-link function that address this issue.
Part b (0.75 points)
Given the following cumulative development triangle of reported losses to be used in a GLM bootstrapping model:
| Accident Year | 12 Months | 24 Months | 36 Months | 48 Months |
|---|---|---|---|---|
| 2011 | 1,500 | 1,300 | 1,200 | 1,250 |
| 2012 | 2,000 | 1,500 | 1,750 | |
| 2013 | 1,750 | 2,000 | ||
| 2014 | 2,200 |
Explain which of the two methods identified in part a. above is the more appropriate method to use on this data set.
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