2009 #10-Reserving

[Kongo]

For the Cape Cod method in the sample answer- Why do we calculate one "Expected Loss Rate" For all the years. Shouldn't the more correct way be to calculate expected loss rate's for each individual year?

[Vorian Atreides]

The Cape Cod Method starts with the single ELR and then adjusts it to each individual year.

You get an equivalent answer if you use on-level premium (instead of recorded premium).

On the Exam, take the path of least resistance and spend the "extra" time tackling another problem.