To calculate the value of X, the revision notes/ASET solution says it is because "the ultimate figure X is simply the DY3 figure for AY1, X =W". This makes sense, as in my head, that is a fully run off accident year and so all claims have been paid. However, what confuses me is then why in 103 Sept 2004 Q7, the incurred claim amount for AY2000 DY3 is different to the ultimate in the table shown in the question. As I'm writing this, I'm thinking this is because in S10Q9(i), claims have already been paid and so are not expecting any more to be paid - hence ultimate = latest development figure in fully run off year; and in S04Q7, the claims are only incurred and we may end up paying more at some later DY and so ultimate =/= latest development figure in fully run off year? Would be great if this could be clarified. Thank you in advance.
The claims aren't fully run off after 3 years. They could have said 4 years (instead of ultimate) - but the flexibility of "ultimate" allows the tails to be longer for cases which drag through the courts.
Oh right ok that makes sense I think. But then why in Sept 2010 Q9 (i) (in order to find X) do we set X to be the same as W? Why are we certain that X = W? As the column X is in, is the column of "ultimates", which by your definition could represent 4 years...which then means we are saying that the 3rd and 4th development year have the same claim amounts? (Sorry if I'm being a bit thick here John)....
Oops! No you're not being thick I just forgot to explain that bit. In September 2010 Q9 it says "all claims are paid by the end of development year 3" Therefore in this case the ultimate column is identical to the DY3 column.
