• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

Questions in frequency-severity

A

Adithyan

Member
I have the following questions pertaining to F-S approach:

We don't take in to account the IBNR claim amounts in the severities (These are basically ultimates of open claims and paid claims trended to period for which rate is needed - Chap 20 mentions this way) to which we fit a distribution. We are taking ultimate claim counts (which is a combination of Reported and IBNR counts) in the frequency distribution. We are here not accounting for IBNR claim amounts in severity. Doesn't it become inconsistent? (Because IBNR claim count accounted in frequency distribution but no IBNR component in severity). What is the reason behind not including IBNR claim amounts in Severity distribution?

I have a small question regarding trending severities

Are we just aggregating losses by cohort year and then looking for a trend in those numbers?

Does the order in which trending and development of losses matter?

Thanks in advance for your time and efforts to help!
 
Last edited by a moderator:
IBNER is included, pure IBNR is not.
severity is a loss per claim, as pure IBNR is not yet reported we can't take into account of distribution. even if you take you would assume pure IBNR severity as same as the severity of reported claims.
 
Back
Top