CAS Exam 8 Fall 2017, Question 16
Study guide: Exam 8
An insurance company generally uses two different methods to price excess layer insurance contracts:
- Empirical construction of Table M; or
- Approximating the distribution of aggregate losses with a continuous approximation model.
Part a (0.5 points)
Briefly describe two potential disadvantages of using a continuous approximation model.
Part b (1.25 points)
Fully describe the process of constructing an empirical Table M and estimating the aggregate loss cost of an excess layer using the table.
Answer this question and see the worked solution