Siewert pg 237, "Adjustment factor"

[JasonScandopolous]

This is in reference to the "alternative approach" for calculating IBNR in siewert. We are given:

Adjustment Factor = (1 + .8*x) / (1 - x), where x = per occurrence charge.

I must be honest when I say that I have no idea what this formula is or what it is supposed to be used on, nor do I understand what the paragraphs before or after it are talking about.

If this has never been tested on, and is not likely to be, I am willing to just pretend I never saw it. However, if anybody can explain what this is supposed to be doing, I'd appreciate it.

[Vorian Atreides]

It's something that I believe is covered (or at least discussed) in more detail on the Advance Ratemaking Exam.

I wouldn't worry too much about it for this exam (apart from knowing when to apply it).

[gaddy]

I wouldn't worry too much about it for this exam (apart from knowing when to apply it).

Yea... I have no clue when to apply it. -1.0 if it shows up on the test.

[antisyst3m]

When estimating ultimate aggregate losses one of the ways you can go about it is to use Table M. One of the steps in looking up the value you'll need from Table M is to convert the chi value using the formula you've shown.

Why they use the formula or how they came up with the adjustment formula is a mystery to me. I really wouldn't spend too much time learning about it at this stage.