Process for QS pricing

I'm slightly confused by some apparently conflicting material in the ST8 Ch 20 about pricing for QS treaties.

The chapter summary says that when pricing a QS you should trend (i.e. adjust for inflation) before developing claims to ultimate. This is consistent with the method described for xol treaty pricing.

However, the core reading (page 29) in the chapter itself says that you should claims to ultimate before adjusting for inflation.

Is one of them wrong, or does it not matter?

 

The LDFs are derived out without taking into account loss trending, so it doesn't matter whether you first do loss developing or loss trending. But in practice we prefer doing loss developing before trending.

 

qs pricing process

Sorry Sherwin, but your response doesn't make much sense to me. (Your first sentence seems to contradict itself and doesn't seem to be consistent with the approach described in the course notes.)

The process described in the course notes produces a set of on-level loss ratios - trended (i.e. adjusted for inflation) and ultimate. (These can be used to produce a loss distribution (trended and ultimate).) My question is just which way round the trending and development processes should be performed here.

 

For QS, developing, and then trending.

 

QS pricing

ok, so you're saying the order for QS is pricing is different from every other type of pricing?

that seems a bit strange. can anyone explain this?