Revision as of 00:22, 19 October 2024 by Admin (Created page with "You are given the following information on losses paid for each of AY1 through AY4: {| class = "table table-bordered" | <br> | <br> | <br> | colspan="4" | Incremental Loss Payments through Development Year |- | Accident Year | Earned Premium | Expected Loss Ratio | 0 | 1 | 2 | 3 |- | AY1 | 20,500 | 0.85 | 13,100 | 9,500 | 3,800 | 2,340 |- | AY2 | 30,000 | 0.7 | 15,100 | 4,825 | 1,200 | <br> |- | AY3 | 27,500 | 0.8 | 15,500 | 4,250 | <br> | <br> |- | AY4 | 31,250...")
ABy Admin
Oct 19'24
Exercise
You are given the following information on losses paid for each of AY1 through AY4:
| Incremental Loss Payments through Development Year | ||||||
| Accident Year | Earned Premium | Expected Loss Ratio | 0 | 1 | 2 | 3 |
| AY1 | 20,500 | 0.85 | 13,100 | 9,500 | 3,800 | 2,340 |
| AY2 | 30,000 | 0.7 | 15,100 | 4,825 | 1,200 | |
| AY3 | 27,500 | 0.8 | 15,500 | 4,250 | ||
| AY4 | 31,250 | 0.75 | 20,100 | |||
Estimate the loss reserve using the expected loss ratio method.
ABy Admin
Oct 23'24
Solution: D
We compute:
| Year | Expected Loss | Cumulative payments | Reserve |
|---|---|---|---|
| AY1 | 20,500 * 0.85 = 17,425 | 16,740 | 685 |
| AY2 | 30,000 * 0.7 = 21,125 | 21,125 | 0 |
| AY3 | 27,500 * 0.8 = 22,000 | 19,750 | 2,250 |
| AY4 | 31,250 * 0.75 =23,437.5 | 20,100 | 3,337.5 |
| Total: 6,310.5 |