Assuming the year required is 2015, then, i have a solution to derive the expected incurred loss in year 2015, different from the two approaches provided in the examiners' report, as below: 1) calculate IBNR as at 31/12/2015 based on BF, similar with that in (iv), i.e. use Ult.-loss-BF of UWY y - (Ult.-loss-CL of UWY y * % dep. y-1) 2) use the IBNR as at 31/12/2014 - the IBNR as at 31/12/2015 (calculated above), to derive the expected incurred loss in year 2015. does it make sense? but a little bit difference from the results of the two approaches since UWY 2011 and onwards. not so sure why. thanks!
As the exam question had an error in it (yes, they did mean 2015), they accepted a wide range of potential answers as long as the assumptions were appropriate. So it may be that your approach would have scored some marks. However, be careful as IBNR is only one component of outstanding claims, and incurred claims in one year is the sum of paid claims and the increase in all outstanding claims (including IBNR). So the calculation can be quite complicated. This is all explained in ASET.
