Revision as of 20:59, 14 May 2023 by Admin (Created page with "You are given the following information: #Case reserves = 187,047 #Losses paid-to-date = 243,005 #Age-to-ultimate incurred loss development factor = 1.08 #IBNR using Bornhuet...")
ABy Admin
May 14'23
Exercise
You are given the following information:
- Case reserves = 187,047
- Losses paid-to-date = 243,005
- Age-to-ultimate incurred loss development factor = 1.08
- IBNR using Bornhuetter-Ferguson method = 47,387
Calculate the absolute difference in the IBNR based on the chain-ladder method and the expected loss ratio method.
- 12,983
- 43,787
- 98,101
- 146,754
- 175,268
Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
ABy Admin
May 14'23
Key: E
First, use the Borhuetter-Ferguson method to calculate the estimated ultimate loss as 47,387/(1-1/1.08) = 639, 724.5. Next, calculate IBNR under the expected loss ratio method as 639,724.5 − (187,047 + 243,005) = 209,672.5. Then, IBNR under the chain-ladder method is (187,047 + 243,005)*0.08 = 34,404.16 . The absolute difference is 209,672.5 − 34, 404.16 = 175, 268.34.
Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.