CAS Exam 7 Spring 2017, Question 16
Study guide: Exam 7
Given the following information ($000) as of December 31, 2016:
| Accident Year | Earned Risk Pure Premium | Rate-Level Adjusted Premium | Aggregate Reported Loss | Aggregate Loss Report Lag | Chain Ladder IBNR | Bornhuetter-Ferguson IBNR |
|---|---|---|---|---|---|---|
| 2012 | 5,000 | 5,000 | 3,500 | .91 | 350 | 364 |
| 2013 | 4,500 | 5,500 | 3,300 | .80 | 825 | 900 |
| 2014 | 5,000 | 6,000 | 2,750 | .67 | 1,375 | 1,667 |
| 2015 | 6,500 | 6,500 | 2,500 | .40 | 3,750 | 3,300 |
| 2016 | 7,000 | 7,000 | 2,000 | .20 | 8,000 | 4,800 |
Part a (1 point)
Calculate IBNR for accident year 2016 using the Stanard-Bühlmann method.
Part b (0.5 points)
Briefly describe one advantage and one disadvantage of the Stanard-Bühlmann method.
Part c (0.5 points)
Comment on an appropriate IBNR selection for accident year 2016.
Answer this question and see the worked solution