I have worked through this question but I was hoping someone might be able to clarify something for me which I can't figure out.
In the last part of the question (at the beginning of the examiner's comments) the solution says that for Company A, reserves are 15 months claims whereas as company B(restated to A's basis) is 47 months claims. I'm not sure how these are calculated. I would calculate them as follows:
A's reserves (assuming they are referring to claims reserves only): 6000
Annual claims for A: 60%*(8000) = 4800
Ration of reserves to claims: 1.25 or 15 months which matches
B's reserves are 12496 (solution to part ii)
B's annual claims: 88%*3200 = 2816
Ration of reserves to claims: 4.43 or 53.25 months which does not match
Examiner's report has 47 months
Similarly, 'm not sure where they get the figures for the tails for A(9 months in examiner's report) and B(4 years in examines report)
Last edited by a moderator: Sep 12, 2014