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Exposure curve calculations

T

thistleandspice

Member
Hi,

Just tried Tutorial 2 Q13, a calculation question using exposure curves. (Note: this may be named differently now, but was Q13 when I took the tutorials in 2010).

Instead of applying inflation to the attachment/exit point, I inflated the original premiums to be the as-if premiums.

The final answer I obtained was total losses of 1265 (vs 1295 in answers), or 2.3% (vs 2.4%) of the total original premium.

Are both methods equally valid?

Many thanks!
 
Nearly.

Look at all the assumptions in part (ii) of the question, and you'll see that you could get it to be equivalent (ie the same rate) if you adjusted everything else in the question for inflation too. But it's far easier to deflate the layer instead, as then you don't have to worry about all the other adjustments!
 
Ahh I see, so the sum insured band AND original premium would need to be inflated vs inflating the layers (which definitely makes inflating the layers must quicker if that's the case!)

Thanks for your help!

thistle
 
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