Hi, In April07 Q1(iv) we are trying to adjust the AY claims because of a change in cover. The change in cover happens half-way through the AY. The answer says that this affects 12.5% of claims. Shouldn't it affect 25% of claims? Also in part (ii) it says that IBNR is automatically included in any reserve estimates when the origin year is the underwriting year. I do remember that there was something in the ST3 notes about this, so I wish I could find them! How can IBNR be automatically included if your number of claims only refers to the reported ones??? Thanks!
There are all sorts of ways of tackling this sort of calculation - ranging from simple trapezium rules (areas of parallelograms etc) to integration. My personal favourite is to use a spreadsheet to show the exposure month by month, as it can be used with changing risk profiles, terms, and pretty much anything else. I've attached the sheet so that you can see how the 12.5% is calculated in this instance. IBNR. If you are doing a triangulation method (chain-ladder for example) and you are using UY cohorts, then once you've done your projection, your answer will include IBNR automatically (because your projection will include claims yet to be reported - based on historical delays) . Contrast this with using a reporting year cohort - in this case, your triangle will never include unreported claims, so when you project the triangle, IBNR will never get included - in which case you'd have to do a separate calculation for IBNR. See Subject G, A1996 P2 Q2 for a good question covering this.
It seems that there is currently an issue with the forum software. You may have problems accessing the zip file if you're using Internet Explorer 8 (which comes with Windows 7). You should be fine if you're using Internet Explorer 6 on Windows XP, or a different browser such as Firefox. The software won't let us attach Excel files directly, which is why we use a zip file (something to do with viruses I expect). Feel free to email me if you need the file. Ian
