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The question doesn't say they have a 5% discount. Try not to introduce new details if you can help it, it's likely to lead you in the wrong...

True enough. In the exam, I imagine it's worth making the distinction between the two. The marking scheme is likely do the same, and after all...

Read the sentence in context. The comparison is between the new discount and the current discount. The examiners aren’t comparing companies with...

Take a look at the attached file, I find it helps to write things out as a little diagram. Yes This is the direct business the cedant intends...

You make a valid point that a claim can exceed the upper limit, that's why insurers buy layers of XL. Eventually, the insurer will have to make a...

If the cedant retains the maximum 1m and cedes the maximum number of lines (ie 10), then the largest EML that can be ceded through the surplus...

Yes that's right. Just imagine claims are Poisson but the cover only pays out on the first one (or two) claims. Your suggestion ignores the...

I'm still mulling over your question George. We're told that the number of claims to the layer are Poisson (and remember the Poisson...

I assume you are referring to Question 9? That's a very broad question Siddhi, you're more likely to get a response if you state which part of...

I interpret the question as follows: The base statistic is the historical loss data for class X in State Y. Then the complement of credibility...

Yes, it sounds like the reinsurance only pays out for a single hit to the layer. You'll see the question then goes on to consider the premium...

The actuary is analysing the complement of credibility for class X in state Y, but class X is also written in other states throughout the US. As...

The questions doesn't say the reinsurance covers only one risk. In fact, whether it does or not is immaterial, because there is no reason why a...

Ah I see, yes now I understand your question! You make an excellent point. A BF calculation (based on an accident year triangle) will indeed...

'At least one claim' means 'either 1 claim, or 2 claims, or 3 claims, or 4 claims ... and so on.' In short, it means 'any possibility EXCEPT no...

That's right. Case-by-case estimate always refers to outstanding reported claims. In my experience it never refers to IBNR claims. I can only...

This is an important skill for you to develop yourself Minh. By analysing a solution closely, you will be better able to pick up marks in a...

I can see what you're trying to do, but I think you've oversimplifiying. A better technique would be to think about: the effect on occurrence...

Many investigations you carry out in practice will involve building a spreadsheet. So I tend to imagine: what that spreadsheet will look like,...

The Course Notes say it can be used 'as an alternative to stripping large claims out of the triangles...'. From this context we can infer that we...

If a reinsurer expects lower returns on its investments, it will be forecasting lower profits. Hence it is likely to increase its premium rates...

Let’s say there is an excess supply in the market, with the result that prices are beginning to fall. You might hope premiums would fall only...

This is written premium for 2010, you're told this in the question.

A basic chain ladder will project whatever claims are included in the triangle. Let’s assume that attritional claims are still developing on the...

This is for Question 4 I take it Sumrah? We do indeed apply inflation to 2007. Take a look at the top of page 7 of the Examiners' Report.

Not quite o.menary. The third table shows us that there IS is an interaction term within the model between policyholder age and the ratio of...

Don’t worry o.menary, you’re not the first to be confused by the concept of near aliaising. Have a look at this thread here...

The 2011 year is only 10 months developed. (It renews on 1st June, and data is as at 31st March).

Hi Laura, Approach 1: Yes that's right, well done. You're asked to reparameterise the lognormal distribution using the best estimate reserve as...

Perhaps you're getting confused by the heading for this column. They've simply calculated the number of policies in force during each month....

From page 38 of Chapter 18 we know that φ=E[σ^2(θ)]=Vik multipled by var (Xik|θi). But we are working with a claim number distribution N rather...

Without knowing which question you're looking at, it's hard to give an answer out of context. However, I can try: Let's imagine you have...

September 2014 Q3 doesn't have a part (iii) Jia, can you check which question you're talking about please? Also, your post is rather vague, so...

That's right David. Your answer is in £000s, we're working in units. There are many variants of the ACPC method. Any reasonable method would...

This is an inflation-adjusted ACPC method, so use the real triangles as calculated in part (ii).

I've knocked up a spreadsheet for you in excel. Hopefully of some use. (This forum won't allow .xls files unfortunately, so I've given you two...

This is a stonking question, so don’t lose heart, everyone will have had trouble with it! Have you bought the ASET? This goes through the...

Please avoid addressing your questions directly to tutors. This forum is a place where students can ask help from each other, and so improve their...

Take a look at the first sentence of the question.

Take a look at the bottom of page 20 and the top of page 21.

Which sentence of the chapter don't you understand Minh?

Have a look at previous posts for this question Laura. Does this help? Calculation of AY ULR estimate - September 2013 Q8iii | Actuarial...

Large losses will probably be subject to different trends than attritional claims, eg different inflationary trends. (I can imagine for example...

I assume you mean part (iii) for exposure rating, not part (ii)? Yes exposure curves have an obvious use in reinsurance pricing, but you could...

You're not the first to struggle with this one. Take a look here Sept 2017 Q7(ii) and here Sept 2017 Q7(ii).

The average date of claim for the base period is the end of February 2017. The average policy inception date under the new rates is the end of...

The claims data is by policy year whereas the solicitors data is by calendar year. So you need to adjust the solicitors data to a calendar year...

That's a long sentence Laura. Let's try rephrasing it: See how that helps?

Ah I see what you're doing Laura. It's the % developed that you need to interpolate, not the CDFs.

The percentage developed is derived from the chain ladder method, not the IELR. So calculate the set of 1/CDF, then interpolate these to obtain...

Age of dog is being modelled using a quadratic, which has 3 parameters (ie y=ax^2+bx+c). But we don't need to include the constant c because...

That's a little beyond the scope of SP8 Amelhypo, but my understanding is that Elastic Net Regularisation can be used in conjunction with GLMs,...

Hi Laura, The formula for earned premium is: EP = written premium - the increase in UPR Inserting the numbers in the question, and noting that...

That's a tricky question Sivapriya. Yes the command verb should 'in theory' give a hint as to how much to write, but I suspect that in practice...

'Investment income on insurance funds' is the investment return earned on the technical reserves, (ie case estimates, IBNR, UPR and so forth)....

Hi PBhella, Q1 Yes they're similar. Note though that the definition for clash cover specifically mentions liability cover. Q2 Surplus RI...

I recommend you go back and revise SP7. The methods for calculating UPR are discussed in depth in Chapter 15, and there are many questions at the...

Imagine that you calculate SCR as at 31st December. You wrote a policy in November, which will still be in force in the new year. That would...

Quite right, well spotted!

Oh dear SVS, that does sound stressful. The markers aren't obliged to work out what you've done wrong, but they might well spot the issue I'd...

Take the original loss ratio, multiply by the (cumulative) inflation and divide by the (cumulative) rate change.

It's not at all clear why you would assume no change in OCR. Written premium has increased for small contracts, so surely the OCR would change....

We don’t assume the non-binder business incepts on 1 July. The examiners provide various alternative calculations, some based on more approximate...

Just divide both sides by sqrt(n).

sigma^2(theta) is not the same thing as var(X). See the top of page 38 of chapter 18.

An underwriting year triangle will project claim events that have not yet occurred, whereas an AY projection will not. You say you have adjusted...

Yes that’s the assumption the examiners are making. Perhaps it’s a little oversimplistic of them to say so, but we’re probably being...

Rate on line = premium for the layer / width of layer. We can consider the (initial) premium charged by the reinsurer to approximately be their...

You needn't match the exact answer. For example, if a solution says 'expenses may go up because ...' whereas you say 'expenses may go down...

From the wording of the question, Company M will pay the reinsurer a ‘premium to settle all current and future claims’. This is not therefore a...

To answer your queries regarding Practice Question 9.10(ii)(b), you might take a look at the attached spreadsheet. Someone handed me this in the...

This question has been asked before. Take a look at our previous post:...

Insurer A will not write business with EML>250k. Ignore any reinsurance when thinking about this sentence. The EML is used to calculate the...

Companies must always hold reserves, irrespective of whether they use accident year or underwriting year accounts. For underwriting year...

You would often calculate UPR as WP*%unearned. Since WP is affected by the rate change, it follows that UPR will also be affected. We need an...

The examiners have used the formula (losses + expenses)/net premium. Perhaps you are using a different denominator?

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...

When we talk about subordinated debts being ‘less secure’, this means that they rank below other instruments on wind-up. So investors who have...

The glossary defines funded accounts as: A method of accounting whereby premiums, claims and associated expenses are related to the underwriting...

Not particularly James, but Solvency II has superseded all regulation and of course IFRS 17 has superseded IFRS 4 and any previous international...

Solvency II has superseded both ICAs and the ICAS regime. In fact S2 is widely felt to have delivered improvements over the ICAS regime in...

Hi there JL24, What a lot of questions. You may find you get a quicker response if you post fewer questions at a time. That would be more...

The key question to ask is ‘What does the cedant want to achieve?’ The cedant will want to protect its loss ratio for an accounting period....

The fifth assumption in the solution would cover this. 'The (single) exposure curve given can be applied to all the business to be reinsured.'...

The credibility estimate is given as Z*observation + (1-Z)*prior estimate. Our observation is the aggregate loss in the first year ($6.75m) and...

Yes these aren't available online, but you might be able to find some old papers hanging around your office. Perhaps you could ask some of your...

Google's definition is broadly ok, but it isn't really talking about general insurance. Your own description of business mix is fine.

It's certainly in CP1 now, quite possibly mentioned in the earlier subjects too.

Hi there Onemoreexamtogo, Thanks for spotting this. The IFoA have deleted the Part VII transfer from the list of Glossary definitions. We'll...

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...

Think of the 'subscription system' as co-insurance, it's a system whereby more than one syndicate takes a share of the same risk. This is exactly...

Hi Leo, As we say in the Course Notes, the derivation of this formula is beyond the scope of the course. In fact, it's surprisingly hard to find...

It's in CM2 Tamara.

There are two ways to calculate this: Either we calculate the reinsurer’s average payout from all claims, and multiply by the expected number of...

As an interesting side note to this, there were only 4 members' agents as of 2018, which would make sense if they are acting for individual Names...

Hello Anu, and good to hear from you again! The question tells us that ‘product recall costs have deflated at 2% per annum over Years 4 and 5,...

Hi JL24, You are quite right, of course, that the broker holds a different amount of premium for each of the first few months of the year. That...

All factors (whether they're continuous or categorical) are included in the linear predictor. See page 14 of Chapter 16, which says: "X is the...

Hi Indexo, I've knocked up an answer for you, hopefully of some use. See the file attached. In fact I suspect your question is probably going...

Ah I see where you're coming from Qayanaat. Well let's try to construct a solution your way and see where it takes us ... Whenever you have any...