PDA

View Full Version : Hugh White's Question

DrActuary
04-05-2011, 03:58 AM
I am looking for the explanation from TIA on the above [Hugh White's Question].

Ken had given an excellent example. Would someone be able to explain it again in the AO?

Thanks!!!

Vorian Atreides
04-05-2011, 09:40 AM
You see a change (deviation, actually) in the expected development of actual losses. How should you respond?

The deviation is simply a reflection of volatility--the deviation is simply a large loss that wasn't expected to emerge until later. So, do nothing.
The deviation is the result of an unanticipated large loss. So, adjust reserves for just that loss, but nothing more.
The deviation is a reflection in projection errors--this particular AY will be worse (for whatever reason) than other historical AY. Increase reserves wholesale accordingly.
This is what comes off the top of my head. I'd be curious to see how close I get to the "correct" answer. :-)

Present Value
04-05-2011, 10:17 AM
Let's say I planned to study 400 hours starting Jan1 for an exam on May1. As of March 1, I have completed 100 hours.

1) Is the estimated total study time still 400 hours? (fixed threshold)
2) Is the estimated total time 100*(400/200) = 200 hours? (loss development)
3) Is the estimated total time 100+(400-200) = 300 hours? (BF method)

DrActuary
04-05-2011, 10:42 AM
Thank you VA and PV