CM 2B - April 2021 Clarification Number 4

[mubatsiri]

I have been going through the April 2021 paper and model solution provided and I am seeking clarification on the following with regards to number 4:

1. How should one interpret “ cumulative incurred claims." It was observed that the model solution assumed these to be more " paid claims" based on the solution that was provided. This clarification is sought given that the question advised that of "cumulative incurred claims" rather than "paid claims."
2. How is " it can be assumed that claims are fully run off after 4 years " interpreted.

Many thanks for any input that can be provided.

 

[Steve Hales]

Hi
1. Unless the question specifically gives "paid claims" data as well as "incurred claims" then it's a reasonable assumption that the two definitions coincide. As you've identified from the examiners, the two concepts can be used interchangeably unless the question makes a clear distinction.
2. To be "fully run off" means that we can assume that there won't be any further claims arising for that year. So in this case there won't be a development year 5.

Hope that helps.

 

[mubatsiri]

Many thanks for the response in reference to the 1st response provided, can it be unreasonable to also assume that since the question references " incurred claims " and not " paid claims," the reserve set for the respective years is the summation of the accumulated numbers in the respective accident years. This question also draws similar comparisons to April 2016 Run - Off Triangle Question that was asked. Going through the solution provided there was also an issue to do with the claims incurred portion of the question, which resulted in the total reserve being set equal to the cumulative totals and not assuming any paid claims.

Looking forward to further engaging and clarification as we continue to fully understand these issues.