2007 #3

[lesecret2000]

Given the following info for a reinsurance contact:
CY 2003
Earned Risk Pure Premium $15,000
On-level Premium $16,000
Agg Report Lag 50%
Chain Ladder IBNR $5,500
Stanard Buhlman IBNR $5,845
Using Patrick's method with a credibility factor of 0.6, calculate the credibility IBNR estimate for 2003.

The solution gives:
Credibility IBNR = Z * Chainladder IBNR + (1-Z) SB IBNR
where Z= Credibility Factor * Report Lag
= 0.6 * 0.5
= 0.3

I haven't seen that calculation of Z anywhere. I did Z= 0.6 as stated in the question. Is this in TIA manual? Can someone refer me to the page? Thanks.

[ThaLetters]

Given the following info for a reinsurance contact:
CY 2003
Earned Risk Pure Premium $15,000
On-level Premium $16,000
Agg Report Lag 50%
Chain Ladder IBNR $5,500
Stanard Buhlman IBNR $5,845
Using Patrick's method with a credibility factor of 0.6, calculate the credibility IBNR estimate for 2003.

The solution gives:
Credibility IBNR = Z * Chainladder IBNR + (1-Z) SB IBNR
where Z= Credibility Factor * Report Lag
= 0.6 * 0.5
= 0.3

I haven't seen that calculation of Z anywhere. I did Z= 0.6 as stated in the question. Is this in TIA manual? Can someone refer me to the page? Thanks.

Not sure about TIA, but I know Patrik specifically covers this in the "Credibility IBNR Estimates" section of his paper (pg 458).

[bsquare]

TIA Patrik Outline page 4, right under the S-B Method.

[punmanbowler]

Okay.. how bout this:

In Patrik: Z(k) = CF (Cred Factor) X Rlag(k)
In TIA: Cred = Z * report lag

Um, which is which and would the graders nail us for it?

[captn]

yup - that problem got me too back then

[2M]

A 1 point problem that I will never miss again and they may not likely ask again

[lesecret2000]

I see.
Just checked the updated manual and you're right about the formula.
I'm still using the manual I downloaded from last year which still says Z = report lag