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Claims inflation - double counting?

N

Nicholas.Campbell

Member
In some of the exam questions (eg ST3 2007 Qu4), the solution requires us to adjust the claims to ultimate and then apply claims inflation.

Would this not be double counting inflation, since the development pattern will already allow for weighted-historic inflation?
 
Depends on the assumptions behind the development pattern. Sometimes development patters have already been adjusted for inflation, but sometimes they haven't. If the question doesn't say anything, just make an appropriate assumption and then run with it, and you'll get credit for it. But don't make your life overly-complicated when it comes to assumptions, otherwise it'll take forever to answer the question!
 
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