Spring 2019 Q17
Why do we multiply the expected claims ratio by the frequency severity trends? Do we always multiply ECR by these trends?
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Comments
The reason the ECR is multiplied by the frequency and severity trends here is that the given ECR is valid for AY 2016 and the problem is asking you to estimate the ultimate claims for AY 2017. That means you have trend the ECR forward by 1 year to get an ECR that's valid for AY 2017.