CAS Exam 8 Fall 2012, Question 21
Study guide: Exam 8
A group of similar risks has an average loss ratio of 80%. The following Lee diagram depicts this group of risks:
Part a (1.5 points)
Calculate the insurance savings at an entry ratio of 1.125.
Part b (0.5 points)
The risks above the 90th percentile have their losses restated, significantly increasing the loss ratio. Describe the change to the insurance savings at an entry ratio of 1.125.
Answer this question and see the worked solution