ST7 April 2016 Q8 Part v

Hi sskulnick,

How about I talk you through the method, then you have a go at the calculation?

To estimate the revised BF IBNR as at 31 December 2015, firstly make a suitable assumption to roll the development pattern on by 12 months.

Then add the incurred claim movements in 2015 (you were given this in the question) onto your previous estimate of the cumulative incurred claims to 31 December 2014 to estimate the cumulative incurred claims to 31 December 2015.

Applying your adjusted development percentages to the incurred claims as at 31 December 2015 will give you a revised chain ladder ultimate as at 31 December 2015.

Now combine this with the initial planned ultimate losses, to derive a new BF estimate of the ultimate claims at 31 December 2015. (You might assume that initial planned ultimate losses are not changed as a result of the observed experience in 2015.)

Subtracting the incurred claims at the same date will give you a revised estimate of the BF IBNR as at 31 December 2015.

Good luck!

 

This is also covered in the ASET - for lengthy calculations it's worth getting that so that you can compare your detailed calculations with the ones we have.