PDA

View Full Version : Fisher and Lester

Sox34
06-10-2005, 01:48 PM
On page 157, it says that the actual IBNR need, as determined in Exhibit I, is \$1,302,000 ... but in looking at exhibit I, I dont' see how that is calculated. Can someone tell me how to calc this from what is given?

Thanks!

Examinator
06-10-2005, 02:00 PM
Sum of earned premium = \$13,600,000.
Expected ultimate losses = 60% of this, or \$8,160,00
Losses incurred to date = \$6,857,849.
IBNR need is the difference between ultimate and to date, or = \$1,302,151.

Sox34
06-10-2005, 02:14 PM
Thanks, Examinator. Do you also know why they use the same development factors (as calc in exhibit V) for the different situations? We are given different triangles in exhibits I-IV, so I don't see why we use the same LDFs as found using exhibit I data.

Examinator
06-10-2005, 02:20 PM
I think it's pretty standard to use a three-year mean (where available) of the link ratios, or a three-year weighted ratio. I'm not sure, otherwise. I think the main idea in this article is claim cost and reserve management trends within the three methods discussed.

Sox34
06-10-2005, 03:06 PM
I think it's pretty standard to use a three-year mean (where available) of the link ratios, or a three-year weighted ratio. I'm not sure, otherwise. I think the main idea in this article is claim cost and reserve management trends within the three methods discussed.

Thanks. I was just concerned with why they used the same LDFs in the Deteriorating Loss Ratio situation as the Static Situation when we are given a triangle in Exhibit II that corresponds to the former. The authors even say that a weakness is that the expected loss ratio approach here yields the same results as the static case because the exp loss ratio and the LDFs haven't changed... which doesn't have to be the case. Anyway, it's probably not a big deal. I'll just move on :) thanks again for the help.

Examinator
06-10-2005, 03:10 PM
I think that's the point they're trying to make: strengths and weaknesses of each method in each situation. I don't think there's anything really deep going on here in this article.