Assignment X6 - QX6.2(ii)

[Onemoreexamtogo]

Hello,

I went through the solution for Qx6.2(ii) in details and still have questions remain.

Very last page - Page 11 - of the solution, I could not follow the figures for:

Cat. burning cost (Year 3) = £2.6%%SI <--how this was derived?

Reasonable check- again I somehow lost and no clue how these number were derived:

35,835,000 <--- the text meant to be overall claim cost per policy form raw data , what it actually refers too? I could not derive myself

331,500 <--- unclear

11,317 <--- unclear

Thanks very much!

 

[Katherine Young]

Cat. burning cost (Year 3) = £2.6%%SI <--how this was derived?

I would take the catastrophe cost and divide by the total sum insured for year 3. Then multiply by 1,000 to express the result as an amount per £1,000 SI:

1,435,000/(10,700*53,900) * 1,000 = £2.49

This is slightly different to the solution, which gives £2.60. Perhaps they’ve used a slightly different method, but I’m sure my result would pick up the mark.

Reasonable check- again I somehow lost and no clue how these number were derived:

35,835,000 <--- the text meant to be overall claim cost per policy form raw data , what it actually refers too? I could not derive myself

331,500 <--- unclear

11,317 <--- unclear

35,835,000 = 3,938 + 4,520 + … + 8,164, ie total gross claims

331,500 = 53,800 + 53,600 + … + 57,300, ie total number of policies

11,317 = (9,000 + 9,800 + … + 14,100)/6 ie the average of the average SI


As it says in the solution, it’s a very crude calculation!

 

[Ian Senator]

I've looked at this again. The solution uses the AY figures from earlier in the solution rather than the UY figures in the question. So 2.60 is 1,435,000/(10,250*53,750)*1,000. As long as you state your assumptions, either approach would be acceptable in my opinion.