April 2015 Question 6

Discussion in 'SP7' started by Actu09, Sep 20, 2015.

  1. Actu09

    Actu09 Keen member

    Hello everyone...

    With regard to the above question in the April 2015 exam paper, how were the accelerated and lagged development ratios produced????:mad: :mad:
     
    Actu09, Sep 20, 2015
    #1
  2. Shillington

    Shillington Member

    Think about this in terms of proportion of ultimate paid.

    According to the factors in the question (suppose) the development was

    15%, 30%, 50%, 90%, 100%

    for years 1, 2, 3, 4 and 5 respectively.

    You can lag or accelerate the payment pattern by half a year by interpolating between these patterns.

    For example, if your business is 1 year developed and you want to estimate the reserve then you would normally take PaidClaims/(1-15%)

    If you want to accelerate it by half a year then instead of using 15% you could use 22.5% (15%+(30%-15%)/2) then your reserve would correspond to if the claims were actually 1.5 years developed. Similarly for the lagging (only the other way!).

    Reply if this doesn't make sense.
     
    Shillington, Sep 20, 2015
    #2
  3. Falak Soomro

    Falak Soomro Member

    Shillington...

    Should we need to adjust the reserve to low and high using each method separately. Looks like a the working is too much for 5 marks.
    I am struggling... can you help?

    I am unable to work out the best estimates of paid and incurred ultimate development percentages
     
    Last edited by a moderator: Mar 24, 2016
    Falak Soomro, Mar 24, 2016
    #3
  4. Katherine Young

    Katherine Young ActEd Tutor Staff Member

    Yes.

    Yes it's a lot to get through. That's not much fun, but at least when you're up against the clock everyone else is in the same boat.

    See attached.
     

    Attached Files:

    Katherine Young, Mar 29, 2016
    #4
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  5. Falak Soomro

    Falak Soomro Member

    I am following what has been done with the exception of 24% in 2014. Is there any assumptions applied to it?
     
    Falak Soomro, Mar 29, 2016
    #5
  6. Katherine Young

    Katherine Young ActEd Tutor Staff Member

    24% = 1/4.147
     
    Katherine Young, Mar 30, 2016
    #6
    Falak Soomro likes this.
  7. Vasundhara Ramalingam

    Vasundhara Ramalingam Member

    Hi there.. the above answers to the first half of this question really helped. But can someone help me understand how were the revised low and high ultimate claims recalculated? The question talks about applying a 10% ELR increase and decrease along with lags and acceleration, and that we should use the methods originally used to calculate the best estimate reserves yearly. But I am still unable to arrive at the right numbers.

    *edited to add - since st7 exam is in 5 days from now, I am hoping to get a reply soon as I am really willing to understand this calculation..*
    Thanks :)
     
    Last edited by a moderator: Sep 15, 2018
    Vasundhara Ramalingam, Sep 14, 2018
    #7
  8. TIBERIUSNYABIGO

    TIBERIUSNYABIGO Member

    Anyone who can help in this question
     
    TIBERIUSNYABIGO, Aug 28, 2023
    #8
  9. TIBERIUSNYABIGO

    TIBERIUSNYABIGO Member

    How do they calculate the low ultimate and the high ultimate figures
     
    TIBERIUSNYABIGO, Aug 28, 2023
    #9
    Rishita Agarwal likes this.
  10. Darren Michaels

    Darren Michaels ActEd Tutor Staff Member

    You need to decrease/increase the ELRs provided by 10% for the low/high estimates respectively - so for 2010 these become 65% and 85% respectively, etc.

    Then use the incremental development factors (link ratios) provided, to derive the cumulative development factors to ultimate and take the reciprocals to derive a paid and incurred development pattern. You can then use linear interpolation to accelerate or lag these patterns by 6 months for the low and high estimates respectively.

    Then reapply the methods given in the question for each underwriting year.
     
    Darren Michaels, Aug 30, 2023
    #10
    Rishita Agarwal likes this.
  11. TIBERIUSNYABIGO

    TIBERIUSNYABIGO Member

    How do you reapply for BF method for example year 2011. I am getting everything else but the readjusted figure is a problem
     
    TIBERIUSNYABIGO, Feb 10, 2024
    #11
  12. Ian Senator

    Ian Senator ActEd Tutor Staff Member

    Full calculations are shown in ASET (2014-2017). Worth getting that because then you'll have all the other calcs and explanations to hand. If not, I suggest you put your calc here so that someone can see where you're going awry...
     
    Ian Senator, Feb 12, 2024
    #12

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