Revision as of 20:02, 22 October 2024 by Admin (Created page with "'''Step 1: Calculate year-to-year development factors''' {| class="table table-bordered" |+ Development Factors |- ! Months !! Factor |- | 12-24 || (6,700 + 7,300)/(5,250 + 5,250) = 1.3333 |- | 24-36 || 7,500/6,700 = 1.1194 |} '''Step 2: Calculate expected losses for each accident year''' {| class="table table-bordered" |+ Expected Loss |- ! Accident Year !! Expected Loss |- | AY2 || 10,000 *0.72 = 7,200 |- | AY3 || 11,500 * 0.75 = 8,625 |} '''Step 3: Calculate t...")
Exercise
Oct 22'24
Answer
Step 1: Calculate year-to-year development factors
| Months | Factor |
|---|---|
| 12-24 | (6,700 + 7,300)/(5,250 + 5,250) = 1.3333 |
| 24-36 | 7,500/6,700 = 1.1194 |
Step 2: Calculate expected losses for each accident year
| Accident Year | Expected Loss |
|---|---|
| AY2 | 10,000 *0.72 = 7,200 |
| AY3 | 11,500 * 0.75 = 8,625 |
Step 3: Calculate the reserves for each accident year using the Bornhuetter-Ferguson method
| Accident Year | Expected Loss | Cumulative Development Factor | Reserve |
|---|---|---|---|
| AY2 | 7,200 | 1.3333 * 1.1194 = 1.4925 | (1-1/1.4925)*7,200 = 2,375.88 |
| AY3 | 8,625 | 1.1194 | 8,625 * (1-1/1.1194) = 919.98 |
| Total: 3,295.86 |