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You need to divide the incremental claims paid in the period (in 2018 terms) by the number of claims settled in the period, ie -...
Hi Minh Ho Your understanding of a 'traditional' commutation arrangement whereby the reinsurance contract is terminated with the liabilities...
Hi Toby I think you make some valid points, which would probably also be worth some credit in the exam. Don't forget though that we do need to...
Hi Heena I am afraid that the calculation above does not look correct to me. You need to work with the reserves (or ultimates by accident...
Hi Heena If I have understood your approach correctly, then I think there may be a slight flaw in step 5. It sounds like you are assuming that...
Proportional reinsurance is normally written on a risks-attaching basis. As motor insurance is a relatively homogeneous class of business, the...
We are equating recoveries less premiums (including reinstatement premiums pro-rata to amount recovered) for programme B and programme A. So for...
Surplus RI is a type of proportional RI. If the loss gets bigger the amount retained by the insurer and the amount ceded to the reinsurer increase...
That’s correct it was added to the ST/SP syllabus in 2010 when ST3 was split into ST7 (now SP7} and ST8 (now SP8). It has been examined in...
Have a look at the workings in the post Ian has linked to above. Recall that the increase in the free assets from one year to the next will be...
This may make it easier for the regulator, eg to compare amounts between different insurers.
Don't forget the basic chain ladder method is applied to cumulative and not incremental claims triangles. I think your examples above are based...
Between mid-May and the end of the year there are 7.5 months, so the business in Q2 is 7.5 months earned by the end of the year - which gives...
The data provided is at 31 March 2012 and the annual contract runs from 1 June each year, so you need to gross up for the premiums estimated to be...
No this question is relevant to SP8 and not SP7 as it is about pricing and not reserving or capital modelling. If you look at this post on the...
No it would still be 0 as with only 2 years of inflation (from 2018 to 2020) it falls below the £1m deductible.
For a factor with three levels, if a risk is not in either of the first two levels of some factor, then it must be in the third level. Its...
The total expenses paid are a balancing item between earned premiums, claims incurred, increase in DAC and the underwriting loss given in the...
Have a look at this post to see whether it answers your questions: Chapter 15 | Actuarial Education (acted.co.uk)
To calculate the UY ULR, you need to apply the BF method using the interpolated June pattern. You then need to make some sensible assumptions to...
Sounds like you are on the right lines, but remember the business will be written uniformly over each month and so on average written in the...
Remember we have £150m of cover available from the drop layer in total, the original £75m plus the reinstated £75m. If we don't use up all of the...
You need to carry out a BF calculation of the revised ultimate not a chain ladder one.
Don't forget that the basic chain method works on cumulative claims and not incremental claims.
In the bold sentence, the closing date is now later - it is only 3 days before the quoted date (eg 28 December 2020) whereas previously it was 5...
From the basic chain ladder projection on page 63. Remember the BF method is a credibility-weighted average between the basic chain ladder method...
Net of QS the £13.25m loss becomes 13.25*0.4=£5.5m. If all 10 lines are used of the surplus treaty are used, that means the risk is shared with...
The date when the modelling is done, does affect which "type" of risk we are dealing with. Assuming that we are using when the business is earned...
The key point here is that once the exposure period has started, the reserves required in respect of the earned exposures will form part of the...
The Examiners were interpreting the information given in the table as already allowing for the excess of $1m. In other words, the table tells...
Yes - Minh Ho - that's right for the original question in the notes which said the policy incepted on 1 July. Your approach is more accurate that...
With the three standard assumptions of: annual policies policies written evenly over the year risk being uniform over the policy period then...
Hi Hong Hong Yes I would expect that the inflation adjustments to be different depending on the precise circumstances of what you are trying to...
6,000 policies incept 1/1, 6,000 incept 1/4 and the remaining 6,000 incept uniformly over the period 1/7 to 31/12, so one average they incept...
Have you tried looking at the solutions handout? Presumably you have attended the tutorial, in which case do you still have the notes / slides...
Hi Raghib Its really up to you, I would think it is safer to enter the data in to Excel and then do any repetitive calculations such as...
We will be producing an updated version of the ASET which will include the September 2023 exam paper and should be available in early 2024.
Hi gtc96 Our understanding of the Core Reading in this section is that it assumes the second scenario above, ie that the reinsurance layer is not...
Per page 38 of Chapter 18, sigma^2(theta) is volume-adjusted variance of the claims ratio (as a function of theta (i)).
Yes if the treaty is written on a losses occurring basis then that is exactly how it works. Have another read of Section 5.3 of Chapter 5. This...
Excess of loss reinsurance is usually written on a losses occurring basis. So the contract in the question will most likely cover losses arising...
As long as you make a sensible assumption, clearly state it and then carry out a calculation which is consistent with that assumption, you should...
Spatial Smoothing is discussed in Section 2.2 of Chapter 17. The idea is that you reduce some of the error in your model in a given rating area...
It sounds to me like you are confusing ILFs and Exposure Curves. ILFs are described in Section 3 of Chapter 15, so perhaps have another read of...
Offsetting in discussed in Section 6.5 of Chapter 16 - have another read of that. Basically, it fixes the effect of one variable (eg NCD or...
Why not try SP7 April 2023 Q8 for a start.
You can use any method / data you like to derive the ultimate (eg paid or incurred triangle), but you will need to use a paid claims development...
Remember commission is paid on proportional reinsurance. With proportional reinsurance the insurer shares its premiums and claims experience with...
Have you tried looking at the ASET for September 2016 as Ian suggested above?
The question says liquidity risk might increase. Reasons why it might increase are due to the need to pay reinsurance premiums and/or the delay...
Purchasing reinsurance is an alternative to holding capital. Buying reinsurance reduces your capital requirements. You need to compare the cost...
A factor based approach would for example calculate reinstatement premiums as a % of the estimated RI recoveries. It will be some sort of...
If the gross book has changed, then the development patterns derived from the historical gross triangle may no longer be appropriate for...
You need to decrease/increase the ELRs provided by 10% for the low/high estimates respectively - so for 2010 these become 65% and 85%...
Have a look at page 12 of the Tables. The coefficient of skewness of a (translated) gamma distribution is 2 / (alpha)^0.5. Hence, the skewness =...
Indeed - As Busy_Bee says look at page 16 of your formulae book, for a compound Poisson distribution.
The retained profit is the increase in SHF from one year to the next - so for Company A for Year 2: 318-273=45 Investment return is the total...
The term baseline profit is not specifically defined anywhere in the course materials and it is only referred to once in the Core Reading on page...
Hi there Yes there is a typo in the CMP which is already noted in the corrections document on our website - see:...
Yes it means that the claims reported are from different accident years, so as you suggest may be subject to different regulations, legislation or...
I am afraid I don't think your interpretation is quite correct. My understanding is as follows: Based on the actual emerging experience, which...
Have a look at paragraph 2.3.19 of the following paper on RITC. https://www.actuaries.org.uk/system/files/documents/pdf/sm20000327.pdf
My understanding is that any single claim cannot exceed the sum of the premiums, but there could be multiple claims which although individually...
By reducing your percentage of the risk, that wouldn't necessarily shorten the tail of the business. The point here is that the risks are...
The nature of London Market business means that some companies may have insured and reinsured each other on different contracts, so when effecting...
You can download a free CMP upgrade from our website, which will enable you to update your materials for the changes to the Syllabus and Core...
Here you go
A good example of this might be the move to driverless cars / autonomous vehicles. This is likely to cause significant disruption to the motor...
Have a read of the Glossary definition of Loss Portfolio Transfer (LPT), which describes the two possibilities. The most common use of the term...
In the first table it says the policy excess is 50 and the limit per claim is 100.
1. 0.55 is the ILF of the layer of cover provided in 2013 that we are trying to price for. We multiply by the ILF of that layer and divide by the...
I think most of the answers to your queries are actually covered in the solutions on pages 33 to 36 of the Chapter. On page 34, we deduce total...
Hi Kiki Good spot there is a typo in that sentence and it should refer to Section 1 where the issues with reserving for inwards reinsurance...
You seem to have an extra 1. in front of both of your expressions: RoC = profit / capital = 40% and profit / premium = 12% Thus substituting...
Here you go.
Hi Roneil Yes you are correct. In this case you will get a (small) reserve for unexpired risks for the most recent underwriting year too. In...
The reported outstanding claims that are part of incurred claims triangles can relate either to claims that have started to be paid or claims in...
Hi Roneil Strictly speaking the outstanding claims reserves (OCR) include all of the following: reporting outstanding claims (=case estimates)...
There are 1,000 policies on risk during Sep, 2,500 in Oct, 4,500 in Nov and 7,000 in Dec. You can think of these as like exposure units. During...
Can you tell us which past exam paper this question relates to please?
The point here is a disadvantage from the perspective of the insureds (not the insurers). If insurers move to more accurate premiums for each...
Hi Lara Yes that's a really good way of thinking about it. I couldn't have said it better myself!
The j in the formula is the size of an individual claim (or win in the example you refer to). Your options for winning 150 are correct, but...
This question is covered in detail in the ASET, so you might like to purchase that for more information, but here are some brief thoughts: -...
There is a typo in the examiners' report - the weighted average loss ratio shown of 97.2% is actually a simple average and the simple average...
The exam is now 3hrs and 20 minutes long, so that's 200 minutes, which gives 2 minutes per mark. You may of course prefer to reduce this and...
Remember an external insurer will be in business to make money, so by keeping the premiums within the group, Coca Cola / Fedex, saves passing on...
Incurred claim triangles, include not only the paid claims, but also the estimated outstanding claims. Consequently, they should be closer to the...
Just to clarify what mugono has said here, reinsurers enter into contracts of reinsurance with either insurance companies or other reinsurers (in...
Hi If you download our CMP upgrade from our website that will cover any material changes from 2021 to 2022:...
Hi Leo For answers to questions like these it is always best to consult the latest version of the Assessment Regulations and Examinations...
Hi Joe This isn't double counting as you are allowing for two different impacts of inflation. Lets say we have data from the 2019 underwriting...
Hi Darshan You need to adjust the prior year loss ratios to make them applicable for 2010 by adjusting for claims inflation and premium rate...
The online classroom and tutorials should not be simplistic than the notes, they merely try to explain things in a slower / step by step way which...
Yes one of the reasons for the underwriting cycle to go from being soft to hard is that premium rates have increased. This can often be due to...
Hi Benoy When calculating the ROCE you should use the Free Reserves (or SHF) at the start of the year and not the end of the year, as this is the...
Hi Smith Different companies may have their own definitions for how they calculate certain ratios internally, but to be on the safe side for the...
One of the issues you will come across in General Insurance is that unfortunately some people use the same or similar terms to mean slightly...
Strictly speaking, the start and end points should vary depending on what it is you are adjusting for, eg changes in underwriting standards or...
