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View Full Version : ELR in Graves/Castillo's CGL ratemaking

abc123
04-30-2005, 06:42 PM
When calculating rate level change

M/M RLF = (WLR * Z + (1-Z) * C) /ELR

In 2003 Q 28,

Target Loss and LAE ratio from last review is provided (ELR1), and this one is used for C calculation

But for the denominator ELR , it uses ELR2 = 1- expenses - profit load.

Seems for many other questions, ELR1 and ELR2 always use the same value.

Why ?

(Thank you for your answer, and excuse me for not having time trying to figure out myself)

Examinator
05-01-2005, 09:26 AM
I think I remember this question. Usually there is one ELR - that used for the current rate review. In this problem they give the last ELR1 and the current ELR2, and ELR1 is used in calculating the credibility complement while the rates are to be revised relative to ELR1. This is the only problem I've seen like that, and I've subsequently put it in my head to use the current ELR in calculating C unless they give you the prior ELR. Long-winded answer. That's what I think.

J.T.
05-03-2005, 05:35 PM
That answer is correct. Using the trended present rates for the complement, you have to use the prior review's ELR. They changed expenses or profit since this review.