CAS Exam 8 Fall 2014, Question 15
Study guide: Exam 8
The balanced plan provisions for a 2014 workers compensation risk are:
| Provision | Value |
|---|---|
| Standard Premium | $6,000,000 |
| Expected Loss (Ratio to Standard Premium) | 0.5 |
Minimum Entry Ratio, r_H |
0.15 |
Maximum Entry Ration (as printed), r_G |
2.52 |
| Basic Premium (Ratio to Standard Premium) | 0.2766 |
| Loss Conversion Factor | 1.25 |
| Tax Multiplier | 1.08 |
| State Hazard Group Differential | 0.95 |
Assume that in the following year the endpoints of the expected loss size ranges in the NCCI Retrospective Rating Manual are increased by 10% to reflect assumed inflation.
Calculate the expected shortfall, as a percentage of 2015 expected retrospective premium, from failing to update the expected loss size ranges.
Part a (2.75 points)
Answer this question and see the worked solution