April03 Q1

[NeedToQualify]

Hi, in April03 Q1 we need the data requirements to assess the price of an Adverse development cover.

In the solution it also mentions individual claims data from the ground up.

Any ideas why individual claims data is useful? Do we also need the development?

Thanks!

 

[Ian Senator]

Individual claims data and its development is what everything else builds on, so is most useful. Of course, in reality, you may not have this.

The solution mentions claims triangles - this will give you the development.

 

[Helen.France]

How does the ADC work in this question...

....although it bizarrely doesn't appear to have been needed for the question ...I couldn't work out how this ADC works.

I thought I understood ADC, it protects against reserve deterioration (I assume in loss ratio terms or a monetary amount - so here reserves are £150m so it may cover any deterioration in reserves beyond say £170m (adjusting for paid claims presumably)) and up to some limit. {So really it's a bit like buying stop loss retrospectively?}

And I thought I understood XOL: £100m coverage for any claims in excess of £100m.

So what on earth is an ADC of £100m xs £100m on reserves of £150m. Surely it doesn't protect against reserves being above £100m if they are set at £150m, but then £100m excess point must be some kind of aggregate limit of claims????

Confused!

 

[Ian Senator]

As you say, doesn't look like it's needed for the question!

I took it mean that the cover would be for deterioration of reserves to between 250 and 350m. So current reserves are 150m, then there's a 100m deductible, then the cover kicks in after this.

I could of course be completely wrong!