Dear Tutors On the ASET workings,you have divided the discounted workings by the OS % at start of the year, i.e. for underwriting year 2012, answer is divided by 98.7%...then multiplied by total outstanding amount as at 31-12-2012 Why are we doing this, since we are only interested with future development?
Hi Lewin, Please don't address your questions to tutors. This forum is a place where students can ask help from each other, and so improve their own understanding. By asking us directly, it discourages others from answering. To answer your question: We take the incremental paid development pattern (5, 2.165, 2.825 etc) and use these to derive a profile of the percentage paid in each development year: 1.3%, 5.1%, 7.4%, 25.2%, 32.1%, 20.3%, 8.7%. Now let’s think what happens if we apply these to the 2012 UY Year: 5.1% of the total claims will be paid in the next 12 months (ie in 6 months’ time on average). Similarly, 7.4% of total claims will be paid during the next 25-36 months (ie in 1.5 years’ time on average), etc. But 1.3% of total claims have been paid already, so the proportion of unpaid claims to be paid in the next 12 months is 5.1/(100-1.3). Similarly, the proportion of unpaid claims to be paid in 1.5 years’ time is 7.4/(100-1.3), etc. You should now have enough information to tackle the remainder of the question. Have a go and see how you get on. Finally, plenty of similar questions have came up in the past, so I advise you to have a look at these once you have understood what’s going on. You could also look at: Subject 303, April 2001, Q9 part (iv) Subject 303 September 2003 Question 7 part (iii) Subject ST3 September 2007 Question 6 part (iv) Lots of students can’t do these sorts of questions, so you’ll be ahead of the game if you can get the hang of it!
