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#1
09-24-2017, 07:19 PM
 Howard Mahler Member CAS Join Date: May 2002 Location: Boston, MA Posts: 1,866
Sample Integrated Q Released

See the attachment from the CAS Webpage
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 Exam8Sample_Integrative_Question_1.pdf (67.6 KB, 325 views)
#2
09-25-2017, 09:55 AM
 FutureActuary II Member CAS Join Date: Dec 2010 College: DePaul University Posts: 237

Any thoughts on the question?
#3
09-25-2017, 10:46 AM
 mikeman Member CAS Join Date: Aug 2009 Posts: 282

Quote:
 Originally Posted by FutureActuary II Any thoughts on the question?
The model solution for part d) on why you'd prefer a retro is wrong
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#4
09-25-2017, 01:18 PM
 FutureActuary II Member CAS Join Date: Dec 2010 College: DePaul University Posts: 237

Quote:
 Originally Posted by mikeman The model solution for part d) on why you'd prefer a retro is wrong
Point number 2 if the Retro is higher than LDD?
#5
09-25-2017, 03:27 PM
 bjc2142 Member CAS Join Date: Aug 2014 Location: Boston Studying for nothing for fall '18 Favorite beer: Asahi Draft Posts: 721

dang, part d is confusing
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#6
09-25-2017, 04:05 PM
 ALivelySedative Member CAS Join Date: Dec 2013 Location: Land of the Pine College: UNC-Chapel Hill Alum Favorite beer: Red Oak Posts: 2,449

Quote:
 Originally Posted by mikeman The model solution for part d) on why you'd prefer a retro is wrong
Quote:
 Originally Posted by FutureActuary II Point number 2 if the Retro is higher than LDD?
Point 1 seems incorrect to me initially. You'd choose the lower premium there since a) it's lower and b) the added safety features should reduce losses and thus reduce the effect of the large deductible anyway.
#7
09-25-2017, 04:15 PM
 bjc2142 Member CAS Join Date: Aug 2014 Location: Boston Studying for nothing for fall '18 Favorite beer: Asahi Draft Posts: 721

Quote:
 Originally Posted by ALivelySedative Point 1 seems incorrect to me initially. You'd choose the lower premium there since a) it's lower and b) the added safety features should reduce losses and thus reduce the effect of the large deductible anyway.
For this particular problem, in extreme cases the retro seems to win out.

With 0 loss:

LDD: still pay same 332,240 premium. Pay 0 for deductible. Total cost = 332,240
Retro: Ratable loss is 0, so R = B*T = 322,567

This was confusing part to me...they should have asked "calculate expected retro premium" in part c. In part d, we are really comparing (LDD prem+ded payment) vs (actual retro prem after adjustments), while the question is asking why pay higher initial retro premium (or expected retro premium) over lower LDD premium which is fixed. I'm not even sure initial retro premium always equals expected retro premium in practice.
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Last edited by bjc2142; 09-25-2017 at 04:20 PM..
#8
09-25-2017, 04:49 PM
 FutureActuary II Member CAS Join Date: Dec 2010 College: DePaul University Posts: 237

Does it seem odd that the paper does not really discuss ways to calculate Modified Expected Loss, but the Case Study and IQ question do so using a hybrid ISO/NCCI method (I know this falls in the realm of something we should be able to do, but it would seem some additional direction on the exam would be fair).

Thoughts?
#9
09-26-2017, 10:13 AM
 cmoibenlepro Member CAS Join Date: May 2007 Location: Montreal Studying for Vegas Posts: 1,782

Quote:
 Originally Posted by Howard Mahler See the attachment from the CAS Webpage
Hello Mr. Mahler, do you have an opinion regarding this question solution?
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#10
09-26-2017, 11:53 AM
 act_123 Member CAS Join Date: Dec 2013 Posts: 3,217

Quote:
 Originally Posted by FutureActuary II Does it seem odd that the paper does not really discuss ways to calculate Modified Expected Loss, but the Case Study and IQ question do so using a hybrid ISO/NCCI method (I know this falls in the realm of something we should be able to do, but it would seem some additional direction on the exam would be fair). Thoughts?
Unfortunately, this seems to be the way the CAS has been asking questions recently on Exam 8 and why people struggle with it. Last year they did this with the reinsurance questions.

I contend that this gave reinsurance actuaries an unfair advantage because they had an easier time figuring out these types of adjustments the CAS intended because they have the knowledge of how they would approach those situations.

I agree with you that I don't think part (a) of this question is fair. I think it is on the syllabus enough for the CAS to say it is material covered.

I do like that they are trying to test your understanding of the material and not the memorization of the formulas. However, having candidates make up their own experience modification formula doesn't seem entirely appropriate.
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Last edited by act_123; 09-26-2017 at 12:00 PM..