2014.Fall #19a

ineedcoffeeineedcoffee
edited August 2018 in CCIR.ARinstr

Answered my own question, made a mistake and was looking at the wrong year.

Comments

  • grahamgraham

    When students reach the point of answering their own questions, my work is done! Slay the beast!

  • jptardif2jptardif2

    Hi Graham,

    Why are we not using the usual (APV(NU.beg)-APV(NU.end)-Paid.all)/APV(NU.beg)) formula? I get a ratio of 0.56%. I thought the difference between undiscounted and discounted excess ratio was only the the II term on the numerator? We are not even including PfADs in part a). I'll wait for your answer before discussing part b).

    Thanks,

  • chrisboersmachrisboersma

    undiscounted so we can ignore the discounting and PfAD adjustments.

  • grahamgraham

    There are 2 differences between the undiscounted and discounted formula for excess(deficiency) ratio. In the undiscounted ratio:

    • ii is not included in the numerator
    • do not use APV (instead, use case reserves + undiscounted IBNR)

    Then the result is:

    • undiscounted ratio
    • = [(275+50) - (250+25) - 50] / (275+50)
    • = [325 - 275 - 50] / 325
    • = 0 / 325
    • = 0%

    Then you do part (b) the "normal" way:

    • discounted ratio
    • = [(150+50+18) - (0+0+0) - 115 + 6.507] / (150+50+18)
    • = 50.2%

    I didn't show the calculation of ii, which works out to 6.507 (in 000s). You can check the examiner's report for that.

  • slocksonslockson

    Hi Graham, I am a little bit confused by the wording of the question. I think that I interpreted "for year 2012" as both accident year 2011 and 2012.

    Is it fair to assume that: "for year 2012" = "for ACCIDENT year 2012"?

  • grahamgraham

    You are right that the question wasn't clear. Your interpretation is reasonable and I just noticed the next time an excess/deficiency question was asked, which was 2015.Spring Q21, they explicitly stated accident year. All exams subsequent to that also clearly state either accident year or calendar year. I'm guessing other people made the same interpretation you did and the examiners realized they needed to state the question more clearly. (The most common way of asking the question is accident year.)

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