CAS Exam 7 Spring 2018, Question 7
Study guide: Exam 7
Given the following information:
Cumulative Reported Loss ($000) as of (months):
| Accident Year | 12 | 24 | 36 | 48 | 60 |
|---|---|---|---|---|---|
| 2012 | 1,300 | 2,350 | 3,500 | 3,650 | 3,750 |
| 2013 | 1,450 | 3,000 | 5,050 | 5,850 | |
| 2014 | 1,600 | 2,500 | 3,700 | ||
| 2015 | 1,750 | 3,050 | |||
| 2016 | 1,950 |
Observed Loss Development Factors as of (months):
| Accident Year | 12-24 | 24-36 | 36-48 | 48-60 |
|---|---|---|---|---|
| 2012 | 1.808 | 1.489 | 1.043 | 1.027 |
| 2013 | 2.069 | 1.683 | 1.158 | |
| 2014 | 1.563 | 1.480 | ||
| 2015 | 1.743 |
- There is no development beyond 60 months.
Part a (0.5 points)
Calculate the ultimate loss for AY 2014 under the assumption that the variance of the next incremental loss is a constant for each development age.
Part b (0.5 points)
Calculate the ultimate loss for AY 2014 under the assumption that the variance of the next incremental loss is proportional to the losses reported to date.
Part c (0.5 points)
Calculate the ultimate loss for AY 2014 under the assumption that the variance of the next incremental loss is proportional to the square of the losses reported to date.
Part d (1 point)
Fully describe a test to determine which of the three variance assumptions in parts a., b., and c. above is most reasonable for the data in this triangle. Do not perform any calculations.
Answer this question and see the worked solution