In chapter 13, page 20, the course notes describe exposure-based methods for reserving. Both bottom-up and top-down approaches seem to apply to a loss event that has already occurred, which puzzled me a little, as I thought that exposure-based methods could also apply before a loss event has occurred.
The expected loss ratio method is also an exposure-based method, right?
I wondered why the section on page 20 was not included in the expected loss ratio section, but I guess the answer is that the bottom-up and top-down approaches are specifically for dealing with large / catastrophe losses.
In the Apr 2012 exam, Q6 (iv), the question asks about exposure-based methods, but the expected loss ratio method is not mentioned in the solution
Dan
Last edited by a moderator: Apr 13, 2015