CAS Exam 8 Fall 2014, Question 25
Study guide: Exam 9
An actuary is using exposure rating to calculate increased limit factors for an auto liability treaty. The actuary has selected a severity distribution for the exposures being considered. The expected value function of losses capped at L is:
E[x; L] = 30 + 900(1 - \ln(1000/L))
Additionally, the actuary has the following information:
- All of the ceding company's underlying policy limits are $1,000,000
- The reinsurance treaty attachment point is $250,000
- The reinsurance treaty limit is $750,000
Part a (1 point)
Calculate the exposure factor.
Part b (0.5 points)
Calculate the ground up expected loss if the estimated loss cost of the treaty layer is $243,500.
Answer this question and see the worked solution