CAS Exam MAS-II Fall 2019, Question 6
Study guide: Exam MAS-II
Policies belong to one of two possible risk groups, Risk Group R and Risk Group S. You are given the following information:
- 40% of policies belong to Risk Group R.
- Risk Group R has claim frequencies that are Poisson distributed with
\lambda = 3. - Risk Group R has claim severity that is uniformly distributed between 3000 and 5000.
- 60% of policies belong to Risk Group S.
- Risk Group S has claim frequencies that are Poisson distributed with
\lambda = 1. - Risk Group S has claim severity that is uniformly distributed between 50 and 500.
- Claim frequency and claim severity are independently distributed given a risk group.
The Bühlmann credibility method is used to calculate the next year's predicted aggregate loss given two prior years of loss experience for a given risk.
Calculate the Bühlmann credibility factor for this risk.
- A) Less than 0.70
- B) At least 0.70, but less than 0.75
- C) At least 0.75, but less than 0.80
- D) At least 0.80, but less than 0.85
- E) At least 0.85
Answer this question and see the worked solution
Concepts tested
- Bühlmann Credibility
- Expected Value of Process Variance
- Variance of Hypothetical Means
- Compound Poisson Process
- Aggregate Loss Model