CAS Exam 8 Fall 2019, Question 13

Study guide: Exam 8

For a given policy that provides first dollar coverage, there is a 50% probability that no claims will occur during the policy period. Given that a claim does occur, the frequency distribution is shown below:

The claim-size variable X for this policy follows a shifted Pareto distribution with the following characteristics:

• e_X(6{,}000) = 15{,}000
• E[X] = 3{,}000
• E[X; 4{,}000] = 1{,}433.30

Part a (1.5 points)

Calculate the expected aggregate loss in the layer 1,000 excess of 4,000 for this policy.

Part b (0.5 points)

Explain one difficulty that can arise when trying to fit an aggregate loss distribution function to losses in an excess layer.

Answer this question and see the worked solution

Concepts tested

• Aggregate Loss Model
• Layer of Insurance
• Limited Expected Value
• Severity Distribution
• Expected Loss

More questions from this set

• CAS Exam 8 Fall 2019, Question 12
• CAS Exam 8 Fall 2019, Question 14