CAS Exam 7 Spring 2019, Question 8
Study guide: Exam 7
Part a (0.25 points)
Briefly explain when a curve-fitting method for selecting loss emergence patterns will produce a higher mean estimate of ultimate losses than a weighted average method.
Part b (0.5 points)
Identify one reason why each of the methods in part a. above might be better than the other for estimating the payment pattern.
Part c (0.5 points)
Briefly explain why the standard deviations of the ultimate losses for each of the scenarios below are narrower than the standard deviation of the ultimate loss for the loss development method using a curve fit to derive the emerged percentages:
- i. Clark Cape Cod method using a curve fit to derive the emerged percentages.
- ii. Loss development method using weighted averages of the development factors.
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