Spring 2016 Q24 b)

judyohjudyoh
in F-15-Evaluation

In part a, we see that actual emergence is less than expected emergence.

Screen Shot 2023-08-04 at 9.34.35 PM.png
Screen Shot 2023-08-04 at 9.36.50 PM.png

What is meant by the "recommended unpaid claims"? By recommending a reserving technique, are we suggesting that the actuary's ultimate selection should change?

Could you let me know if I am understanding the solution correctly:

i) We know that actual emergence is less than expected emergence so if we use a development method, then because reported claims are lower than we assumed given our current LDF selections (we know this because expected is higher than actual), we will get a lower ultimate compared to previously so we have reduced our unpaid amount

ii) We acknowledge the lower than usual reported claims using the reported development method weighting for the BF, but we develop unreported claims as usual using ECR method so that our recommend unpaid is the same as expected.

iii) We use ECR method and thus disregard the lower than expected reported claims we are observing. In this way, the unpaid is higher than previous.

Thank you.

Comments

  • GrahamGraham

    I'm not sure if you saw this old post about this exam question, but here's the link:

    Anyway, to address your questions:

    • "Recommended unpaid claims" is just the normal unpaid claim estimate (or equivalently, the reserve estimate.)

    I don't think this was a very well constructed exam question and given the length of the explanation in the examiners' report, it appears that candidates were confused about this question as well.

    For (i)

    • If you calculate the unpaid amounts as of Dec 31, 2014, using the reported development method, you do indeed get a lower unpaid amount versus using the given selected ultimates, but even though that's true for this example, that might not be true in general - it depends on the whole triangle. You could come up with a triangle with the same latest diagonal but where the reported development method produces a higher unpaid estimate rather lower.

    For (ii) and (iii), your explanation (and the examiners' report) is correct.

Sign In or Register to comment.