I'm a little stuck on understanding the answer to this question. The part that I don't understand is why the incurred's to date aren't calculated to ultimate before the burning cost premium is calculated. I was under the appreciation (possibly wrongly) that the burning cost premium is the total cost of claims (ie ultimate cost) divided by the total exposure to risk. I'm also confused why the ultimate claims aren't used in this question but are used for Q5 of the September 2007 paper. Any help appreciated!
I think you'll find they are! So, for example, the figure of 57 (own damage) that they have in the damage costs for 2007, is calculated as 40/70%. They just haven't shown that as an intermediate step. If you buy ASET, you'll see all the steps laid out in detail.
