CT6 A04 Q5 vs A05 Q9

[veeko]

I'm having a look at some past questions on run off triangles, in particular, the inflation adjusted method.

The 2 questions I'm having a look at are April 04 question 5 and September 05 question 9.

I am happy with the answer and method for A04 Q5, as inflation adjustments were taken as 'half of one years inflation, and half of the previous year' as the question says that we may assume that all claims are paid at the end of the year (which is why we make half year adjustments).

However, for S05 Q9, also gives us inflation figueres to middle of each year (but does not tell us when the claims are paid - at the middle of the year or at the end??). But, the question also says that claims are assumed to be run off at the END of development year 3. Would it be reasonable to assume that claims are also paid at the end of the year, in which case I'd have to make half year adjustments as well. The solution to this question looks at the year's full inflation rate and does not take account of the fact that inflation is given to the middle of each year.

Would I still get credit for the question if I took half yearly inflation adjustments (eg for 2001 I have 1.021^0.5 * 1.012^0.5 * 0.992^0.5)?

Thanks for your help

 

[John Lee]

Would it be reasonable to assume that claims are also paid at the end of the year, in which case I'd have to make half year adjustments as well.

The standard assumption (which would be stated if you were asked for the assumptions) is that claims are paid in the middle of each year on average.

So although it says end of development year 3. We assume that all the claims paid over that entire year are paid in the middle on average.

This should be your approach unless they do tricky things and explicitly say payments are at some other time.