CAS Exam 7 Spring 2017, Question 6

Study guide: Exam 7

Given the following information:

Accident Year	Cumulative Paid Loss ($000): 12 Months	24 Months	36 Months	48 Months	60 Months
2012	500	750	950	1,050	1,100
2013	800	1,500	1,850	2,000
2014	1,100	2,100	2,750
2015	1,400	2,300
2016	2,000

Age-to-age factors are determined by a volume weighted average of all years.
There is no development beyond 60 months.
Reserves are approximated by a lognormal distribution.
The 90th percentile of the standard normal distribution is 1.28
The accident year 2014 loss reserve estimate, $R_3$ , has a standard error of 52.33

Part a (2 points)

Construct an 80% confidence interval for $R_3$ .

Construct a confidence interval for the accident year 2014 ultimate loss estimate using empirical limits.