CAS Exam 8 Fall 2014, Question 6
Study guide: Exam 8
Losses on a policy have the following distribution:
- 60% probability of a loss between $0 and $250,000
- 30% probability of a loss between $250,000 and $500,000
- 10% probability of a loss between $500,000 and $1 million
Losses are uniformly distributed within each range. Assume a 20% trend is applied uniformly to all losses.
Part a (1.5 points)
Draw a diagram depicting the cumulative loss distribution described above before and after the 20% trend. Label all relevant features of the diagram.
Part b (2 points)
Calculate the implied trend for the layer $500,000 excess of $500,000.
Answer this question and see the worked solution