CAS Exam 8 Fall 2019, Question 12
Study guide: Exam 8
An actuary is assessing the current Table M underlying the pricing of a book of business. All policies within the book of business have identical expected losses and are expected to have exactly one claim during the policy period. The actuary divides the book of business into two subsets of policies, Subset A and Subset B, and finds the following distributions of aggregate losses:
Part a (0.5 points)
Discuss why the current Table M may not be appropriate for this book of business.
Part b (1 point)
Using the observations in Subset B, calculate the insurance charges associated with the following claim sizes:
i. 10,000
ii. 40,000
iii. 80,000
Part c (0.5 points)
Briefly describe two considerations when using the Table M calculated in part b. above to support the creation of a Table M for a different line of insurance.
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