last parts to Q2 Can somebody please put me out of my misery and post the right approach to verifying the £2m reserve in the second last part and then the increase in SH funds in the last part? I tried a few ways and with little time to spare and panic setting in I made a total mess of it. sigh.
well, I can tell you that you weren't the only one who struggled with that..... I applied the 20% expected ULR to the earned premium, then said 75% of this would be paid and outstanding (as 25% of ultimate was IBNR) - then knocked off 10% of earned for the paid to get an outstanding figure..... Said it "looks reasonable". Couldn't think of anything else to do! As for the last part, I just said they'd increase as a result of holding 100% of UPR and the business looked pretty profitable..... Somehow I don't think I'll get 18/18 on these parts..... Was there anywhere in the question I could have talked about misselling - I did write that as a keyword on the paper at the start, but then forgot to see if I could stick that in my answer anywhere.
Thanks guys, glad to hear I wasnt the only one who had trouble with these. Was worried I had missed something obvious. Jeff - re the cat loss I spoke about the potential to make extraordinary calls on the members, see this paper. http://www.actuaries.org.uk/files/pdf/library/proceedings/gen_ins/gic1991/pi_clubs.pdf
...and since when was everything that is examined part of either the Core Reading or on the reading list?
Not pretty indeed. And to cap it all, I wasn't on good form either. Just wasn't firing on all cylinders (as you'll all be pleased to hear!!). 16 did seem excessive for Q1 part 2. I was looking at the paper thinking "this shouldn't be too tough" - but after reflecting, I can see it wasn't the easiest paper ever. Turned into a bit of a torrid time on Q2. Time pressure makes accounts go bad!! Oh well, off to the Grand National this weekend so hope I have better luck there.
Worried! Now that the papers are on the net, I get the feeling that the paper was indeed much tougher than it seemed. Struggled a bit with some parts of Q1, part (ii) where I could not figure out what more to say over new capital calls and digging into members' funds. Also, am never sure how much to write and tend to get into time trouble! Q2 was no joke either, just have the feeling there was a lot more to be said/written! Could not get to the final part. My approach to (v) was similar to Chris' and I made a few comments on reasonability of using industry averages to estimate the IBNR, O/S claims and CHE. After reading comments posted here I am getting even more worried!!
Well, my thoughts aren't particularly usefull as I don't have to sit the exam! It's a lot easier being this side of the 'goalposts'! I can certainly understand people feeling it was tricky in places. There were certain bits (I don't need to tell you which) for which I think many students would find difficult to generate a huge amount of ideas. But then huge amount of ideas isn't the aim, is it. Sensible suggestions should also score well. Having said that, it was nice to see questions broken down into parts. Long 50-markers frighten people, so hopefully that gave some people some confidence. I think the products concerned and the ideas behind mutual companies may have caught some people out, but a well-prepared student with well-reasoned arguments should be OK. Let's cross our fingers. Don't worry about it though. What's done is done.
Any reasonable and justified approach to this part of the question would, I hope, have scored marks. In a nutshell, you can define incurred claims any way you like - some take it to include IBNR, some don't. Sometimes it refers to paid plus change in o/s (usually for accounts), sometimes to paid plus o/s (usually for triangles). By ultimate ratio, they mean without any further development, ie including all claims, both reported and IBNR. Scaling up a paid loss ratio allows for all the oustanding claims (both reported and not), as long as your assumptions are appropriate. So, as long as you defined all your terms appropriately, and stated your assumptions, you would have been OK.
