cgott42
08-16-2006, 07:06 PM
This is a very basic question as I'm not familiar with the terms or context here.
In the Loss Ratio method (Table 1 pg 222) showing the calculation for a single policy - can someone explain the columns?
Specifically
column (3) ELR - didn't Seiwert say the loss ratio used is that which was used to price each policy - i.e. the excess LR for the excess layer priced, if so what is the Excess Ratio used for?
If it's the full coverage LR that he mentions that we can get from industry experience, thus apply the excess ratio to get the portion ABOVE the deductible why is it named "Deductible" Loss Charge?
Lastly, what is the Aggregate Loss Limit Charge? We apply it to the full coverage (ground up) losses - the excess losses (?) col(6) - i.e. this is losses BELOW the deductible.
Shouldn't it be applied to losses above the deductible (i.e. subject to the agg. loss limit)?
Now, assuming that it is applied to the excess losses, does this mean it (e.g. 2%) is saying that we expect 2% of excess losses to be capped by the agg. loss limit. So does this mean that the amount in column (8) is an amount that we want to EXCLUDE from losses (then why is it called a "charge").
Sorry for so many questions, mostly it seems there's a prerequisite knowledge base necessary in order to understand what's going on in this paper.
In the Loss Ratio method (Table 1 pg 222) showing the calculation for a single policy - can someone explain the columns?
Specifically
column (3) ELR - didn't Seiwert say the loss ratio used is that which was used to price each policy - i.e. the excess LR for the excess layer priced, if so what is the Excess Ratio used for?
If it's the full coverage LR that he mentions that we can get from industry experience, thus apply the excess ratio to get the portion ABOVE the deductible why is it named "Deductible" Loss Charge?
Lastly, what is the Aggregate Loss Limit Charge? We apply it to the full coverage (ground up) losses - the excess losses (?) col(6) - i.e. this is losses BELOW the deductible.
Shouldn't it be applied to losses above the deductible (i.e. subject to the agg. loss limit)?
Now, assuming that it is applied to the excess losses, does this mean it (e.g. 2%) is saying that we expect 2% of excess losses to be capped by the agg. loss limit. So does this mean that the amount in column (8) is an amount that we want to EXCLUDE from losses (then why is it called a "charge").
Sorry for so many questions, mostly it seems there's a prerequisite knowledge base necessary in order to understand what's going on in this paper.