CAS Exam 7 Spring 2016, Question 7
Study guide: Exam 7
Given the following information:
| Accident Year | Cumulative Reported Losses ($000) as of 24 Months | Cumulative Reported Losses ($000) as of 36 Months |
|---|---|---|
| 2009 | 3,000 | 5,000 |
| 2010 | 5,000 | 8,000 |
| 2011 | 2,500 | 9,000 |
| 2012 | 3,200 | 6,000 |
| 2013 | 3,800 | 7,000 |
| 2014 | 2,500 |
Part a (1.25 points)
Create a scatter plot of the weighted residuals for reported losses as of 36 months against reported losses as of 24 months following Mack's methodology.
Part b (0.5 points)
Identify the chain-ladder method assumption needed for least-squares optimality that can be tested by reviewing the scatter plot created in part a. above and briefly explain whether this assumption has been violated.
Answer this question and see the worked solution