Exam MAS-II Practice Question 2
Study guide: Exam MAS-II
An insurer estimates the average claim severity for a class of commercial risks with Bühlmann credibility. You are given:
- Earned exposures in the class: 1,000
- Claims observed in the class: 50
- Observed average severity: $6,200
- Expected value of the process variance of a single claim amount: 36,000,000
- Variance of the hypothetical mean severities: 400,000
- Prior mean severity: $5,000
Calculate the Bühlmann credibility estimate of the class's average severity.
- A) 5,000
- B) 5,429
- C) 5,771
- D) 6,101
- E) 6,200
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