Q8 April 2017, ST7

Discussion in 'SP7' started by Smith, Jun 26, 2021.

  1. Smith

    Smith Very Active Member

    Have a few confuse points,

    (iii) the method "Incurred Claims", seems not covered by the study materials. so my question is, as a method of reserving, is it common that mentioned a method which are out of the syllabus in the question?

    (iv) regarding the ACPC calculations,

    - for the number of losses in 2014-2016, why assume one claim more added for 2015, i.e. the 5 rather than the 4 as average? i think it may not be appropriate to do so just based on the higher average claim of that year from ITD losses.

    - for average claim calculation, why excluded the value of AY 2011? i think just lower value may not be a so strong agreement to justify that. concerning maybe change in legislative environment since then, or definition change and/or reserving methodology alter as mentioned in (ii) iro. large loss per se.

    - regarding the inflation, there is not any indication in the question to require or guide to allow for impact of inflation, why do that? whether can be credit full marks if did not allow for any inflation factors but correct in all calculations?

    thanks!
     
  2. Ian Senator

    Ian Senator ActEd Tutor Staff Member

    (iii) 'Incurred Claims' is not the name of a method per se. The examiners are just saying that they will take incurred claims to date as the total for those years.

    (iv) You need to justify all your choices, as reserving is not an exact science! For example, in ASET, we chose 5 rather than 4 claims for 2015 as the reported incurred was abnormally high for that year. We also allowed for 5% inflation, the examiners expected you to make a choice, as you would have to do in real life.

    All this is explained fully in ASET. I recommend having a look at that.

    Ian
     

Share This Page