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Accident year risk environment

J

Jordan Ko

Member
Hi,

First two paragraphs on page 10 in chapter 15, the advantage of the accident year approach is discussed. At first, it states that all claims are from the same exposure cohort and will usually be subject to the same risk environment even if they have arisen from different underwriting years with different terms. In the example provided in the following paragraph concludes by saying that claims occurring in a particular year will come from policies with different risk environment.

These two statements seems to be contradictory unless the first risk environment is related to the claims and the second risk environment is related to the policy terms. This seems a bit ambiguous and I was wondering if someone could help to clarify.

Thank you in advance.

Best regards
Jordan
 
Hi Jordan
Yes, your understanding is correct. Note the first part of that last sentence '...the terms under which policies are written'. So the risk environment in this second example is only changing as a result of the change in policy terms.
Ian
 
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