CAS Exam 7 Spring 2019, Question 4

Study guide: Exam 7

An insurer writes high deductible workers compensation policies with a per-occurrence deductible of $2,000,000.

Given the following information as of December 31, 2018:

Cumulative Reported Losses ($000) Limited to $1,000,000:

Limited Expected Values ($000) at $500,000 Basic Limit:

Limited Expected Values ($000) at $1,000,000 Limit:

Limited Expected Values ($000) at $2,000,000 Limit:

Unlimited Expected Values ($000):

• Assume there is no development after 48 months.
• Accident year 2017 reported losses excess of the $2,000,000 deductible at 24 months are $50,000.
• Accident year 2017 reported losses limited to the $2,000,000 deductible at 24 months are $2,400,000.

Part a (1.75 points)

Calculate the expected ultimate loss to the insurer for accident year 2017 as of December 31, 2018 using the procedure outlined by Sahasrabuddhe.

Part b (1 point)

An exponential claim size model was used to produce the limited expected values in the tables above. Explain how the estimate of the ultimate loss to the insurer would change if a smaller model parameter was used.

Answer this question and see the worked solution

Concepts tested

• Limited Expected Value
• Deductible
• Layer Development Factor
• Excess Insurance

More questions from this set

• CAS Exam 7 Spring 2019, Question 3
• CAS Exam 7 Spring 2019, Question 5