CAS Exam 7 Spring 2019, Question 19
Study guide: Exam 9
An actuary is reviewing results of a hurricane model on a potential new reinsurance program. The actuary simulates five years of losses with the following results:
Combined Ratios:
| Simulation | Direct | Net of Current Program | Net of Proposed Program |
|---|---|---|---|
| #1 | 130% | 105% | 115% |
| #2 | 180% | 140% | 130% |
| #3 | 80% | 90% | 100% |
| #4 | 90% | 95% | 105% |
| #5 | 200% | 160% | 150% |
Part a (1.25 points)
Construct a coverage option cumulative distribution function chart using the simulations above.
Part b (0.5 points)
Select a reinsurance program and briefly explain your selection based on the simulations above if an actuary is primarily concerned about losses in the tail.
Part c (0.75 points)
Calculate the 80th percentile results using direct data for the following:
- i. V@R
- ii. TV@R
- iii. XTV@R
Part d (0.25 points)
Define WTV@R.
Part e (0.5 points)
Briefly describe a weakness of TV@R and briefly explain how WTV@R corrects the weakness.
Answer this question and see the worked solution