CAS Exam 7 Spring 2018, Question 2
Study guide: Exam 7
Given the following information for a workers compensation book written with a per-occurrence deductible of $500,000:
Fitted Limited Severity:
| Limit | 36 months | Ultimate |
|---|---|---|
| Unlimited | $5,000 | $9,000 |
| $500,000 | $4,500 | $6,600 |
| 36 months | Ultimate | |
|---|---|---|
| Observed Deductible Loss | $1,000,000 | - |
| Observed Excess Loss | $275,000 | - |
| Modeled Excess Age-to-Ultimate Factor | 3.00 | - |
| Insurance Charge Ratio | 0.20 | 0.30 |
- Expected claims volume = 1,000 claims.
Part a (2.25 points)
Assess the reasonability of the modeled excess IBNR compared to the loss ratio approach.
Part b (0.5 points)
Given the following:
Volume Weighted Claim Count Age-to-Age Development Factors as of (months):
| 12-24 | 24-36 | 36-48 | 48-60 | 60-72 |
|---|---|---|---|---|
| 1.50 | 1.25 | 1.15 | 1.05 | 1.00 |
Describe an issue with using limited severity data at 36 months.
Answer this question and see the worked solution
Concepts tested
- Deductible
- Limited Expected Value
- Excess Loss Development Factor
- Implied Development Method
- Excess Insurance