CAS Exam 7 Spring 2019, Question 13
Study guide: Exam 7
Given the following information for a reinsurer as of December 31, 2018:
| Accident Year | Earned Risk Pure Premium ($000) | Adjusted Premium ($000) | Aggregate Reported Loss ($000) | Aggregate Loss Report Lag |
|---|---|---|---|---|
| 2015 | 6,800 | 7,400 | 4,500 | 90% |
| 2016 | 7,200 | 7,700 | 3,400 | 70% |
| 2017 | 7,600 | 7,900 | 2,300 | 50% |
| 2018 | 8,000 | 8,000 | 3,000 | 30% |
- Report lag reaches 100% in the 5th year.
Part a (1 point)
Calculate the IBNR estimate for accident year 2018 as of December 31, 2018 using the Stanard-Bühlmann (Cape Cod) method.
Part b (0.25 points)
Calculate the IBNR estimate for accident year 2018 as of December 31, 2018 using the chain ladder method.
Part c (0.5 points)
Calculate the IBNR estimate for accident year 2018 as of December 31, 2018 using a credibility-weighted combination of the Stanard-Bühlmann and chain ladder methods given a selected credibility factor of 0.6.
Part d (0.5 points)
Describe a situation in which an actuary would choose to use a credibility-weighted combination of the Stanard-Bühlmann and chain ladder methods.
Answer this question and see the worked solution