The question makes no mention of a stability clause (in fact I wouldn't expect it to, seeing as this isn't a reinsurance question). Therefore I don't think there's any need to inflate the XS or limit. We simply need to inflate the past claims to allow for the fact that the past data is smaller than it would be in today's terms, ie to allow for the fact that today's claims would be more likely to breach these limits.
The method followed by the examiners is to:
- Use the ILFs to get the hypothetical claims cost, assuming the 2013 XS and limit had been in place.
- Then inflate these to 2013 values.
- Then develop losses.
I'm not sure what you mean here I'm afraid. You do need to adjust the past claims using the ILF, to work out what the cost would be under today's XS and limit.
I wouldn't go adjusting the ILF for inflation though, because you'd have to do that for each year separately, which is a bit of a pain.
Quite possibly. Have a look at April 2010 Q5 part (iv).
Last edited: Apr 29, 2014