2011 #6

[zoky]

Hi
2011 #6 b)
the solution is IBNRBF = Expected loss × unreported % ; unreported % xs loss
= 1-1/3.583= 72.093%

How get 3.583?

[Bobby]

They use the equation:

[zoky]

Originally Posted by Bobby

They use the equation:

thank you so much sincerely

[patrickcu2]

Does anyone else think that part a should have been done using the severities as was done above for part b? The model solution uses the ratio of the limited losses to the unlimited losses rather than the ratio of limited severity to unlimited severity to come up with the development factor. Since losses are used, the answer for direct development comes out exactly the same as implied development since implied development in essence is used to calculated the development factor rather than severity relativities.

[IKnewIt]

I agree that the CAS sample solution for part a is sketchy at best. They used the implied development method, but called it direct development because they calculated an XSLDF.

[Galois]

Does it matter if you calculate R with the relative severities or with the relative losses? My understanding is that it should give you the same result (limited and unlimited claim counts should be the same). Do you think they would have given credit if R was 3.5 (using losses), and if not why not?

[truck79]

Originally Posted by Galois

Does it matter if you calculate R with the relative severities or with the relative losses? My understanding is that it should give you the same result (limited and unlimited claim counts should be the same). Do you think they would have given credit if R was 3.5 (using losses), and if not why not?

I think the disparity is that excess claim counts don't stay the same. Since the proportion of limited claim counts + excess claim counts to total claim counts don't equal 1 the weighting of x and 1-x doesn't work, making weighting difficult unless you adjust for this by... blah, blah, blah. I'd always default to the paper for the exam, which uses relative severities.

I'm guessing a candidate recieve full credit for a) and shouldn't have. Then the person placing the solutions together either didn't catch it or didn't know any different. Oops...