Spring 2018 Q21

keshav1996keshav1996
in F-13-BerqSherm

Hi,

Two doubts in this questions-

  1. Going by the normal approach, when we calculate an adjusted reported triangle using BS adjustments and are finally multiplying the 12-ult CDF by the YTD of AY 2017, why are we multiplying by the "adjusted" YTD reported and not the "original"? I was under the impression that the BS adjustments just help us come up with more appropriate LDFs. YTDs have to be used as is to come up with ultimate.
  2. Given that we are NOT explicitly told to use "reported" Berq Sherm and when in fact we are given the Berq Sherm adjusted paid triangle with the tail factor for paid, why don't we simply apply chain ladder on adjusted paid ?

Thanks.

Comments

  • GrahamGraham

    Question 1:

    • This question was different from the normal B-S reported method. Normally the last diagonal doesn't change when you make the adjustments, but in this problem they asked you to use 2016 as the basis for adjusting so it was the next-to-last diagonal that didn't change. In general you're right that the purpose is to come up with better (less distorted) LDFs. I think the examiners were just trying to make the question a little different from what they usually ask.

    Question 2:

    • It would be interesting to apply the development to the adjusted paid triangle to see how it compares to the results using the adjusted reported triangle but just applying the development to the adjusted paid triangle they provided would make the problem too easy for 2.50 points. Even though they didn't say explicitly to use the reported BS method, that's clearly what they wanted you to do because they gave you all the information you needed to do that. If someone had just done the development method on the adjusted paid triangle they provided, they would have gotten 0 points.
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