CAS Exam 7 Spring 2017, Question 5

Study guide: Exam 7

Given the following information as of December 31, 2016:

Accident Year	Onlevel Premium	Cumulative Paid Loss
2014	$400,000	$210,000
2015	375,000	130,000
2016	450,000	50,000

$G(x) = \frac{x^{1.5}}{x^{1.5} + 15^{1.5}}$ , where $G$ is the cumulative proportion of ultimate losses paid and $x$ the average age in months.
Parameter standard deviation for Cape Cod method: 175,000
Process variance/mean scale parameter ( $\sigma^2$ ) for Cape Cod method: 3,000

Part a (1.5 points)

Calculate the total standard deviation of the Cape Cod method's total loss reserve indication.

Part b (1 point)

Calculate the total loss reserve by credibility-weighting the two indications from the Cape Cod method and chain ladder method using the Benktander method.

Part c (0.5 points)

Identify and briefly describe a different growth curve form that would be more appropriate to approximate the loss payment pattern for a short-tailed line of business.

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CAS Exam 7 Spring 2017, Question 5

Part a (1.5 points)

Part b (1 point)

Part c (0.5 points)

Concepts tested

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