CAS Exam 7 Spring 2016, Question 18
Study guide: Exam 7
Given the following information for a retrospectively rated book of business as of December 31, 2015:
| Policy Effective Year | Policy Effective Quarter | Ultimate Loss | Losses Reported at Prior Retro Adjustment |
|---|---|---|---|
| 2011 | 1 | $92,500 | $92,500 |
| 2011 | 2 | 57,000 | 57,000 |
| 2011 | 3 | 125,000 | 125,000 |
| 2011 | 4 | 80,000 | 78,000 |
| 2012 | 1 | 64,000 | 57,000 |
| 2012 | 2 | 37,500 | 30,000 |
| 2012 | 3 | 60,000 | 55,000 |
| 2012 | 4 | 65,000 | 60,000 |
| 2013 | 1 | 55,000 | 50,000 |
| 2013 | 2 | 40,000 | 33,000 |
| 2013 | 3 | 70,000 | 52,500 |
| 2013 | 4 | 60,000 | 45,000 |
| 2014 | 1 | 50,000 | 0 |
| 2014 | 2 | 40,000 | 0 |
| 2014 | 3 | 65,000 | 0 |
| 2014 | 4 | 45,000 | 0 |
| 2015 | 1 | 25,000 | 0 |
| 2015 | 2 | 20,000 | 0 |
| 2015 | 3 | 30,000 | 0 |
| 2015 | 4 | 5,000 | 0 |
| Retro Adjustment Period | Selected PDLD Ratio | Percent Loss Emerged |
|---|---|---|
| First | 1.75 | 78.5% |
| Second | 0.70 | 10% |
| Third | 0.55 | 7% |
| Fourth | 0.45 | 4% |
| Subsequent | 0.00 | 0.5% |
| Policy Period | Premiums Booked from Prior Adjustment | Premiums Booked as of December 31, 2015 |
|---|---|---|
| 2011 | $450,000 | $452,000 |
| 2012 | 335,000 | 337,000 |
| 2013 | 330,000 | 335,000 |
| 2014-2015 | 0 | 425,000 |
Calculate the premium asset as of December 31, 2015.
Part a (3 points)
Answer this question and see the worked solution