Basic Track IV

1

Basic Track IV

Case Study

Handouts/Overheads

2000 CLRS

September 2000

Minneapolis, Minnesota

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Monstertruck MutualCommercial Automobile Liability

Incurred Losses ($000) at Accident Period Maturity in Months

AccidentYear 12 24 36 48 60 72 841993 4,392 5,819 6,553 6,979 7,209 7,317 7,3321994 5,117 6,913 7,950 8,482 8,728 8,8331995 5,833 7,799 8,883 9,425 9,7071996 6,912 9,732 11,036 11,7541997 8,225 11,787 13,4841998 (a) 13,3671999 11,500

Incurred Loss Development Factors (LDF's)

AccidentYear 12 - 24 24 - 36 36 - 48 48 - 60 60 - 72 72 - 84 84 - ULT1993 1.325 1.126 1.065 1.033 1.015 1.0021994 1.351 1.150 1.067 1.029 1.0121995 1.337 1.139 1.061 1.0301996 1.408 1.134 1.0651997 1.433 1.1441998 1.389

All Yr. Avg 1.374 1.139 1.065 1.031 1.014 1.002Latest 3 Yr Avg 1.410 1.139 1.064 1.031X High/Low 1.371 1.139 1.065 1.030Industry 1.398 1.141 1.063 1.032 1.016 1.001 1.013

Selected 1.410 1.139 1.064 1.031 1.014 1.002 1.013Age to Ult. 1.813 1.286 1.129 (b) 1.029 1.015 1.013

Incurred LDF Method

Incurred ProjectedAccident Loss (000) Age to Ult Ultimate

Year at 12/31/99 LDF Loss (000)1993 7,332 1.013 7,4271994 8,833 1.015 8,9661995 9,707 1.029 (c)1996 11,754 1.061 12,4731997 13,484 1.129 15,2241998 13,367 1.286 17,1901999 11,500 1.813 20,852

Total 75,977 92,123

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Paid Losses ($000) at Accident Period Maturity in Months

AccidentYear 12 24 36 48 60 72 841993 1,713 3,758 5,239 6,328 6,657 6,837 6,9531994 2,042 4,387 6,256 7,551 7,959 8,2221995 2,223 4,933 6,940 8,467 8,9411996 2,589 6,044 (d) 10,6381997 3,043 7,487 10,8931998 3,368 7,9321999 4,370

Paid Loss Development Factors (LDF's)



Selected 2.383 1.436 1.215 1.054 1.030 1.017 (e)Age to Ult. 4.903 2.057 1.433 1.179 1.119 1.086 (e)

Paid LDF Method

Paid ProjectedAccident Loss (000) Age to Ult Ultimate

Year at 12/31/99 LDF Loss (000)1993 6,953 1.068 7,4261994 8,222 1.086 8,9301995 8,941 1.119 10,0031996 10,638 1.179 12,5441997 (f) 1.433 15,6061998 7,932 2.057 16,3191999 4,370 4.903 21,424

Total 57,949 92,252

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Monstertruck MutualCommercial Automobile LiabilityReported Counts and Averages Method

Reported Claim Counts at Accident Period Maturity in MonthsAccident

Year 12 24 36 48 60 72 841993 445 545 575 582 585 585 5851994 544 635 674 680 682 6821995 625 744 780 790 7911996 691 833 877 8831997 785 924 9721998 775 9401999 935

Reported Claim Count Development Factors


All Yr. Avg 1.196 1.054 1.010 1.003 1.000 1.000Latest 3 Yr Avg 1.198 1.051 1.010 1.003X High/Low 1.196 1.053 (g) 1.003

Selected 1.198 1.051 1.010 1.003 1.000 1.000 1.000Age to Ult. 1.276 1.065 1.013 1.003 1.000 1.000 1.000

Reported Claim Count Development Method

Reported ProjectedAccident Counts Age to Ult Ultimate

Year at 12/31/99 LDF Counts1993 585 1.000 5851994 682 1.000 6821995 791 1.000 7911996 883 1.003 8861997 972 1.013 9851998 940 1.065 1,0011999 935 (h) 1,193

Total 5,788 6,122

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Monstertruck MutualCommercial Automobile LiabilityReported Counts and Averages Method

Average Incurred Loss at Accident Period Maturity in MonthsAccident

Year 12 24 36 48 60 72 841993 9,870 10,677 11,397 11,991 12,323 12,508 12,5331994 9,406 10,887 11,795 12,474 12,798 12,9521995 9,333 10,483 (i) 11,930 12,2721996 10,003 11,683 12,584 13,3111997 10,478 12,756 13,8721998 12,417 14,2201999 12,299

Average Incurred Loss Development Factors


All Yr. Avg 1.149 1.080 1.054 1.027 1.014 1.002Latest 3 Yr Avg 1.177 1.084 1.054 1.027X High/Low 1.148 1.082 1.055 1.028


Projected Projected ProjectedAverage Ultimate Ultimate Ultimate

Accident Inc'd Loss Age to Ult Average Claim LossesYear at 12/31/99 LDF Inc'd Loss Count ($000)1993 12,533 1.013 12,696 585 7,4271994 12,952 1.015 13,146 682 8,9661995 12,272 1.029 12,631 791 9,9911996 13,311 1.057 14,071 886 12,4621997 13,872 1.114 15,455 985 15,2181998 14,220 1.208 17,174 1,001 (j)1999 12,299 1.421 17,483 1,193 20,850

Total 91,460 102,656 6,122 92,102

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Bornhuetter-Ferguson (B-F) Method for Accident Years 1998 and 1999

Accident Earned Expected Expected IBNR Indicated Incurred UltimateYear Premium Loss Ratio Losses Factor IBNR Losses Losses1998 21,212 0.780 16,545 0.222 (l) 13,367 (m)1999 26,383 0.780 (k) 0.449 9,230 11,500 20,730

Summary of Ultimate Loss Estimates ($000)

Projected Ultimate LossesReported

Incurred Paid Counts &Accident Earned LDF LDF Averages B-F

Year Premium Method Method Method Method Selected1993 10,460 7,427 7,426 7,427 7,4271994 13,185 8,966 8,930 8,966 8,9501995 15,603 9,991 10,003 9,991 10,0001996 17,803 12,473 12,544 12,462 12,5001997 20,845 15,224 15,606 15,218 15,3501998 21,212 17,190 (n) 17,188 17,047 17,0001999 26,383 20,852 21,424 20,850 20,730 (o)

Total 125,491 92,123 92,252 92,102 92,127

Projected Ultimate Loss RatiosReported

Incurred Paid Counts &Accident LDF LDF Averages

Year Method Method Method Selected1993 71% 71% 71% 71%1994 68% 68% 68% 68%1995 64% 64% 64% 64%1996 70% 70% 70% 70%1997 73% 75% 73% (p)1998 81% 77% 81% 80%1999 79% 81% 79% 79%

Total 73% 74% 73% 73%

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Monstertruck MutualCommercial Automobile LiabilityPaid ALAE Ratio Development Method

Ratio of Paid ALAE to Paid LossesAccident

Year 12 24 36 48 60 72 841993 17.09% 13.36% 13.50% 14.05% 14.40% 14.62% 14.72%1994 17.28% 13.55% 13.66% 14.13% 14.39% 14.62%1995 17.15% 13.51% 13.73% 14.33% 14.78%1996 17.66% 13.69% 13.88% 14.47%1997 18.13% (q) 14.37%1998 18.73% 14.40%1999 19.25%

Ratio of Paid ALAE to Paid Losses Development Factors




ProjectedPaid ALAE Ultimate

Accident Ratio Age to Ult ALAEYear at 12/31/99 LDF Ratio1993 14.72% 1.010 14.87%1994 14.62% 1.017 14.87%1995 14.78% 1.033 15.27%1996 14.47% 1.059 15.33%1997 14.37% 1.102 15.83%1998 14.40% 1.117 16.08%1999 19.25% 0.867 (r)

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ULAE Ratio Estimate

Paid PaidCalendar ULAE Loss ULAE

Year ($000) ($000) Ratio1997 537 10,131 5.30%1998 643 12,616 5.10%1999 785 15,098 (s)

Total 1,965 37,845 5.19%

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Total Loss and Loss Adjustment Expenses Reserves ($000)Total

Projected Incurred Paid Case O/S Projected UnpaidAccident Ultimate Losses Losses Losses IBNR Losses Losses

Year Losses at 12/31/99 at 12/31/99 at 12/31/99 at 12/31/99 at 12/31/991993 7,427 7,332 6,953 (t) 95 4741994 8,950 8,833 8,222 611 117 7281995 10,000 9,707 8,941 766 293 1,0591996 12,500 11,754 10,638 1,116 746 1,8621997 15,350 13,484 10,893 2,591 1,866 4,4571998 17,000 13,367 7,932 5,435 (u) 9,0681999 20,900 11,500 4,370 7,130 9,400 16,530

Total 92,127 75,977 57,949 18,028 16,150 34,178

Projected ProjectedProjected Projected Paid Unpaid Estimated Unpaid

Accident Ultimate Ultimate ALAE ALAE ULAE ULAEYear ALAE Ratio ALAE at 12/31/99 at 12/31/99 Ratio at 12/31/991993 14.87% 1,104 1,023 81 5.2% 151994 14.87% 1,331 1,202 129 5.2% 221995 15.27% 1,527 1,321 206 5.2% 351996 15.33% 1,916 1,539 376 5.2% 681997 15.83% 2,430 1,565 864 5.2% 1641998 16.08% 2,734 1,142 1,592 5.2% (v)1999 16.69% 3,487 841 2,646 5.2% 674

Total 14,529 8,635 5,894 1,309

Total Loss and Loss Adjustment Expense ReserveEstimated as of 12/31/99 41,381Recorded as of 12/31/99 40,905

Estimated Redundancy/(Deficiency): (w)

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Basic Track IV

Case Study

Set II

Handouts/Overheads

2000 CLRS

September 2000


11

Monstertruck MutualCommercial Automobile Liability - Variant Case

Incurred Losses ($000) at Accident Period Maturity in Months

AccidentYear 12 24 36 48 60 72 841993 4,392 5,819 6,553 6,979 7,209 7,317 7,3321994 5,117 6,913 7,950 8,399 8,728 9,0201995 5,833 7,799 8,883 9,339 9,8171996 6,912 9,732 11,036 12,0241997 8,225 11,787 14,0421998 8,980 14,1071999 13,181

Incurred Loss Development Factors (LDF's)




Incurred LDF Method

Incurred ProjectedAccident Loss (000) Age to Ult Ultimate

Year at 12/31/99 LDF Loss (000)1993 7,332 1.013 7,4271994 9,020 1.015 9,1561995 9,817 1.039 10,2041996 12,024 1.082 13,0101997 14,042 1.153 16,1961998 14,107 1.332 18,7931999 13,181 1.960 25,830

Total 79,523 100,616

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Paid Losses ($000) at Accident Period Maturity in Months

AccidentYear 12 24 36 48 60 72 841993 1,713 3,758 5,239 6,328 6,657 6,837 6,9531994 2,042 4,387 6,256 7,551 7,959 8,2221995 2,223 4,933 6,940 8,467 8,9411996 2,589 6,044 8,734 10,6381997 3,043 7,487 10,8931998 3,368 7,9321999 4,370

Paid Loss Development Factors (LDF's)




Paid LDF Method

Paid ProjectedAccident Loss (000) Age to Ult Ultimate

Year at 12/31/99 LDF Loss (000)1993 6,953 1.068 7,4261994 8,222 1.086 8,9301995 8,941 1.119 10,0031996 10,638 1.179 12,5441997 10,893 1.433 15,6061998 7,932 2.057 16,3191999 4,370 4.903 21,424

Total 57,949 92,252

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Monstertruck MutualCommercial Automobile Liability - Variant CaseReported Counts and Averages Method

Reported Claim Counts at Accident Period Maturity in MonthsAccident

Year 12 24 36 48 60 72 841993 445 545 575 582 585 585 5851994 544 635 674 680 682 6821995 625 744 780 790 7911996 691 833 877 8831997 785 924 9721998 775 9401999 935

Reported Claim Count Development Factors




Reported Claim Count Development Method

Reported ProjectedAccident Counts Age to Ult Ultimate

Year at 12/31/99 LDF Counts1993 585 1.000 5851994 682 1.000 6821995 791 1.000 7911996 883 1.003 8861997 972 1.013 9851998 940 1.065 1,0011999 935 1.276 1,193

Total 5,788 6,122

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Monstertruck MutualCommercial Automobile Liability - Variant CaseReported Counts and Averages Method

Average Incurred Loss at Accident Period Maturity in MonthsAccident

Year 12 24 36 48 60 72 841993 9,870 10,677 11,397 11,991 12,323 12,508 12,5331994 9,406 10,887 11,795 12,351 12,798 13,2261995 9,333 10,483 11,388 11,822 12,4111996 10,003 11,683 12,584 13,6171997 10,478 12,756 14,4471998 11,587 15,0071999 14,097

Average Incurred Loss Development Factors




Projected Projected ProjectedAverage Ultimate Ultimate Ultimate

Accident Inc'd Loss Age to Ult Average Claim LossesYear at 12/31/99 LDF Inc'd Loss Count ($000)1993 12,533 1.013 12,696 585 7,4271994 13,226 1.015 13,425 682 9,1561995 12,411 1.039 12,900 791 10,2041996 13,617 1.079 14,691 886 13,0111997 14,447 1.139 16,459 985 16,2071998 15,007 1.252 18,791 1,001 18,8061999 14,097 1.536 21,658 1,193 25,829

Total 95,339 110,619 6,122 100,640

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Summary of Ultimate Loss Estimates ($000)

Projected Ultimate LossesReported

Incurred Paid Counts &Accident Earned LDF LDF Averages

Year Premium Method Method Method Selected1993 10,460 7,427 7,426 7,427 ?1994 13,185 9,156 8,930 9,156 ?1995 15,603 10,204 10,003 10,204 ?1996 17,803 13,010 12,544 13,011 ?1997 20,845 16,196 15,606 16,207 ?1998 21,212 18,793 16,319 18,806 ?1999 26,383 25,830 21,424 25,829 ?

Total 125,491 100,616 92,252 100,640 ?

Projected Ultimate Loss RatiosReported

Incurred Paid Counts &Accident LDF LDF Averages

Year Method Method Method Selected1993 71% 71% 71% ?1994 69% 68% 69% ?1995 65% 64% 65% ?1996 73% 70% 73% ?1997 78% 75% 78% ?1998 89% 77% 89% ?1999 98% 81% 98% ?

Total 80% 74% 80% ?

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Questions or Discussion Based on the Variant Case

• In this example, the Reported Loss Development and the Reported Counts and Averages method produce higher ultimate loss estimates than the Paid Loss Development Method. What would you do in this situation:

a pick the average of the three as a compromise

b pick the highest answer to be more conservative

c pick the lower answer to appear more profitable

d investigate potential reasons for the difference in estimates

e change the assumptions so that the three methods produce equal results

• Do the historical reported loss and paid loss development patterns look consistent in this instance, or have the patterns changed?

• What changes did you notice? What are some possible explanations for them?

• How would you go about investigating the changes? Who would you talk to, and what additional data would you look at?

• How could changes in the following disciplines impact the data:

– Underwriting

– Claims

– Marketing

– Accounting

– Data Processing

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Basic Track IV

Case Study

Set III

Handouts/Overheads

2000 CLRS

September 2000


18


Diagnostics - Cumulative Closed Claim Counts

AccidentYear 12 24 36 48 60 72 841993 54 238 357 435 490 546 5681994 51 274 422 515 568 6351995 66 308 473 594 6751996 64 364 527 6471997 71 393 5891998 72 4031999 86

Cumulative Closed Claim Development Factors



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Diagnostics - Open Claim Counts

AccidentYear 12 24 36 48 60 72 841993 391 307 218 147 95 39 171994 493 361 252 165 114 471995 559 436 307 196 1161996 627 469 350 2361997 714 531 3831998 703 5371999 849

Open Claim Count Development Factors



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Monstertruck MutualCommercial Automobile Liability - Variant CaseDiagnostics - Changes in Avg Incurred Losses per Reported Claim

Average Incurred Losses per Reported ClaimAccident

Year 12 24 36 48 60 72 841993 9,870 10,677 11,397 11,991 12,323 12,508 12,5331994 9,406 10,887 11,795 12,351 12,798 13,2261995 9,333 10,483 11,388 11,822 12,4111996 10,003 11,683 12,584 13,6171997 10,478 12,756 14,4471998 11,587 15,0071999 14,097

Percentage Change from Prior Accident Year

AccidentYear 12 24 36 48 60 72 841993 -4.7% 2.0% 3.5% 3.0% 3.9% 5.7%1994 -0.8% -3.7% -3.4% -4.3% -3.0%1995 7.2% 11.5% 10.5% 15.2%1996 4.7% 9.2% 14.8%1997 10.6% 17.6%1998 21.7%

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Monstertruck MutualCommercial Automobile Liability - Variant CaseDiagnostics - Changes in Average Paid Losses per Closed Claim

Average Paid Losses per Closed ClaimAccident

Year 12 24 36 48 60 72 841993 31,722 15,790 14,675 14,547 13,586 12,522 12,2411994 40,039 16,011 14,825 14,662 14,012 12,9481995 33,682 16,016 14,672 14,254 13,2461996 40,453 16,604 16,573 16,4421997 42,859 19,051 18,4941998 46,778 19,6821999 50,814


AccidentYear 12 - 24 24 - 36 36 - 48 48 - 60 60 - 72 72 - 84 84 - ULT1993 26.2% 1.4% 1.0% 0.8% 3.1% 3.4%1994 -15.9% 0.0% -1.0% -2.8% -5.5%1995 20.1% 3.7% 13.0% 15.3%1996 5.9% 14.7% 11.6%1997 9.1% 3.3%1998 8.6%

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Monstertruck MutualCommercial Automobile Liability - Variant CaseDiagnostics - Changes in Average Case O/S Losses per Open Claim

Average Case O/S Losses per Open ClaimAccident

Year 12 24 36 48 60 72 841993 6,852 6,713 6,028 4,429 5,811 12,308 22,2941994 6,237 6,997 6,722 5,139 6,746 16,9791995 6,458 6,573 6,329 4,449 7,5521996 6,895 7,864 6,577 5,8731997 7,258 8,098 8,2221998 7,983 11,4991999 10,378


AccidentYear 12 - 24 24 - 36 36 - 48 48 - 60 60 - 72 72 - 84 84 - ULT1993 -9.0% 4.2% 11.5% 16.1% 16.1% 38.0%1994 3.5% -6.1% -5.8% -13.4% 12.0%1995 6.8% 19.6% 3.9% 32.0%1996 5.3% 3.0% 25.0%1997 10.0% 42.0%1998 30.0%

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Monstertruck MutualCommercial Automobile Liability - Variant CaseDiagnostics - Ratio of Paid Losses to Incurred Losses

Ratio of Paid Losses to Incurred LossesAccident

Year 12 24 36 48 60 72 841993 0.390 0.646 0.799 0.907 0.923 0.934 0.9481994 0.399 0.635 0.787 0.899 0.912 0.9121995 0.381 0.633 0.781 0.907 0.9111996 0.375 0.621 0.791 0.8851997 0.370 0.635 0.7761998 0.375 0.5621999 0.332

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Monstertruck MutualCommercial Automobile Liability - Variant CaseDiagnostics - Claim Count Reporting and Closing Patterns

Ratio of Reported Claim Counts to Ultimate Claim CountsAccident

Year 12 24 36 48 60 72 841993 0.761 0.932 0.983 0.995 1.000 1.000 1.0001994 0.798 0.931 0.988 0.997 1.000 1.0001995 0.790 0.941 0.986 0.999 1.0001996 0.780 0.941 0.990 0.9971997 0.797 0.938 0.9871998 0.774 0.9391999 0.784

Ratio of Closed Claim Counts to Ultimate Claim CountsAccident

Year 12 24 36 48 60 72 841993 0.092 0.407 0.610 0.744 0.838 0.933 0.9711994 0.075 0.402 0.619 0.755 0.833 0.9311995 0.083 0.389 0.598 0.751 0.8531996 0.072 0.411 0.595 0.7311997 0.072 0.399 0.5981998 0.072 0.4031999 0.072

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Questions or Discussion based on the Diagnostics

• What does the additional diagnostic data tell you about the changes in the loss development patterns?

• After examining this additional data, how would you change the original methods and assumptions shown?

26

Basic Track IV

Case Study

Appendix

Handouts/Overheads

2000 CLRS

September 2000


27

Monstertruck MutualCommercial Automobile Liability - Variant CasePossible Solution #1 - Adjustment to Case O/S Losses for Changes in Case

Reserve Adequacy Using Average Case O/S ValuesAverage Case O/S Loss

AccidentYear 12 24 36 48 60 72 841993 6,852 6,713 6,028 4,429 5,811 12,308 22,2941994 6,237 6,997 6,722 5,139 6,746 16,9791995 6,458 6,573 6,329 4,449 7,5521996 6,895 7,864 6,577 5,8731997 7,258 8,098 8,2221998 7,983 11,4991999 10,378

Restated Average Case O/S Losses (Latest Diagonal Deflated using 9% Annual Trend Rate)

AccidentYear 12 24 36 48 60 72 841993 6,188 7,474 5,825 4,535 6,356 15,577 22,2941994 6,745 8,146 6,349 4,943 6,928 16,9791995 7,352 8,879 6,920 5,388 7,5521996 8,014 9,679 7,543 5,8731997 8,735 10,550 8,2221998 9,521 11,4991999 10,378

E.G.: 9,679 = 11,499 / (1.09^2)

Restated Total Case O/S Loss (Adjusted Average Case O/S Loss x Number of Open Claims)

AccidentYear 12 24 36 48 60 72 841993 2,420 2,294 1,270 667 604 607 3791994 3,325 2,941 1,600 816 790 7981995 4,110 3,871 2,125 1,056 8761996 5,025 4,539 2,640 1,3861997 6,237 5,602 3,1491998 6,693 6,1751999 8,811

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Monstertruck MutualCommercial Automobile LiabilityPossible Solution #1 - Adjustment to Case O/S Losses for Changes in Case

Reserve Adequacy Using Average Case O/S ValuesRestated Incurred Losses (Paid Losses + Restated Total Case O/S Losses)

AccidentYear 12 24 36 48 60 72 841993 4,133 6,052 6,509 6,995 7,261 7,444 7,3321994 5,367 7,328 7,856 8,367 8,749 9,0201995 6,333 8,804 9,065 9,523 9,8171996 7,614 10,583 11,374 12,0241997 9,280 13,089 14,0421998 10,061 14,1071999 13,181

Restated Incurred Loss Development Factors




Restated ProjectedAccident Inc'd Losses Age to Ult Ultimate

Year at 12/31/99 LDF Loss (000)1993 7,332 1.013 7,4271994 9,020 1.013 9,1371995 9,817 1.041 10,2231996 12,024 1.081 12,9971997 14,042 1.144 16,0591998 14,107 1.211 17,0851999 13,181 1.697 22,365

Total 79,523 95,294

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Monstertruck MutualCommercial Automobile Liability - Variant CasePossible Solution #2 - Adjustment to Incurred Losses for Changes in

Case Reserve Adequacy using Paid Loss to Incurred Loss RatioIncurred Losses

AccidentYear 12 24 36 48 60 72 841993 4,392 5,819 6,553 6,979 7,209 7,317 7,3321994 5,117 6,913 7,950 8,399 8,728 9,0201995 5,833 7,799 8,883 9,339 9,8171996 6,912 9,732 11,036 12,0241997 8,225 11,787 14,0421998 8,980 14,1071999 13,181

Paid LossesAccident

Year 12 24 36 48 60 72 841993 1,713 3,758 5,239 6,328 6,657 6,837 6,9531994 2,042 4,387 6,256 7,551 7,959 8,2221995 2,223 4,933 6,940 8,467 8,9411996 2,589 6,044 8,734 10,6381997 3,043 7,487 10,8931998 3,368 7,9321999 4,370

Latest Diagonal Paid Loss To Incurred Loss RatioAccident

Year 12 24 36 48 60 72 841993 0.9481994 0.9121995 0.9111996 0.8851997 0.7761998 0.562 0.776 = 10,893 / 14,0421999 0.332

Restated Incurred Losses (Paid Losses/Latest Diagonal Paid Loss to Incurred Loss Ratio)Accident

Year 12 24 36 48 60 72 841993 5,167 6,684 6,754 7,152 7,309 7,501 7,3321994 6,159 7,802 8,065 8,535 8,739 9,0201995 6,705 8,773 8,946 9,570 9,8171996 7,809 10,749 11,259 12,0241997 9,178 13,316 14,0421998 10,159 14,1071999 13,181 8,946 = 6,940 /0 .776

30

Monstertruck MutualCommercial Automobile LiabilityPossible Solution #2 - Adjustment to Incurred Losses for Changes in

Case Reserve Adequacy using Paid Loss to Incurred Loss RatioRestated Incurred Losses (Paid Losses/Latest Diagonal Paid Loss to Incurred Loss Ratio)

AccidentYear 12 24 36 48 60 72 841993 5,167 6,684 6,754 7,152 7,309 7,501 7,3321994 6,159 7,802 8,065 8,535 8,739 9,0201995 6,705 8,773 8,946 9,570 9,8171996 7,809 10,749 11,259 12,0241997 9,178 13,316 14,0421998 10,159 14,1071999 13,181

Restated Incurred Loss Development Factors




Restated ProjectedAccident Inc'd Losses Age to Ult Ultimate

Year at 12/31/99 LDF Loss (000)1993 7,332 1.013 7,4271994 9,020 1.013 9,1371995 9,817 1.042 10,2331996 12,024 1.067 12,8341997 14,042 1.137 15,9631998 14,107 1.183 16,6941999 13,181 1.663 21,915

Total 79,523 94,204

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Basic Track IV

Case Study

Answer Key

Handouts/Overheads

2000 CLRS

September 2000


32

Answer Key

a 9,623 = 13,367 / 1.389

b 1.061 = 1.029 x 1.031

c 9,991 = 9,707 x 1.029 (Answer off slightly due to rounding)

d 8,734 = 10,638 / 1.218

or

= 6,044 x 1.445

e 1.068 industry tail factor has been selected

f 10,893 from triangle above

g 1.011 = (1.012 + 1.009) / 2

h 1.276 from "Age to Ult" line above, 12 months to ultimate

i 11,388 = 8,883 / 780 x 1,000

j 17,188 = 17,174 x 1,001 / 1,000 (Answer off slightly due to rounding)

k 20,579 = 26,383 x 0.780

l 3,680 = 16,545 x 0.222 (Answer off slightly due to rounding)

m 17,047 = 13,367 + 3,680

n 16,319 from projected ultimate losses using Paid LDF Method

o 20,900 selected based on judgment

p 74% = 15,350 / 20,845

q 14.2% = 14.37% / 1.012

or

= 18.13% x 0.783

r 16.7% = 19.25% x 0.867

s 5.2% = 785 / 15,098

t 379 = 7,332 - 6,953

u 3,633 = 17,000 - 13,367

v 330 = (5,435 /2 +3,633) x 0.052

w (476) = 40,905 - 41,381

Documents

Basic Track IV