Hi guys, Just struggling with some of question 7 in the above paper. I think I understand what's happening but going through ASET, I'm a bit confused. The question says 'Other case reserves are being revised in line with new procedures and this process is expected to take about a year'. To me this means all case reserves (inc historic case estimates) will be reviewed over the next year. Therefore at the second review (assuming annual reviews all claims will have been adjusted). ASET says only the two leading diagonals will be based on the new reserving philosophy. Are you assuming that reviews are done quarterly? That would make more sense than my assumption but just want to check. Secondly, ASET says 'there is no indication that historical claim estimates will be adjusted, only the case estimates for the current leading diagonal onwards'. Why make this assumption? Thanks in advance!
The question says that "other case reserves are being revised". They intended you to interpret this as "other existing case reserves", rather than "every case reserve ever posted, even those that are no longer case reserves because they've since been settled". The question makes no mention of historical case reserves, so we shouldn't asssume they're included in the exercise. (It's always dangerous to extrapolate too much from the information given, so better stick to what you're told for sure.) I'm not sure why you think this. Let's say the change is implemented from Oct 2013 onwards, and annual triangles are used. At year end 2013, the leading diagonal will be affected. At year end 2014, another diagonal is added to the triangle, so that's now the leading 2 diagonals that are affected.
