Could you apply the actual Loss ratio to the outstanding claims and the expected loss ratio to the claims reported to date or is there a reason for the way it's done in this question? i.e. maybe since the outstanding claims are set aside now , will have been done using the initial loss ratio, though then again, the claims to date, should have been done using this initial estimate also can any one add some clarification to this for me - thanks a lot.
The question asks what the impact that the difference between the initial and actual ultimate loss ratio has on the declared profits of the company at the end of each of the three years. We need to use the actual loss ratio to see how much has been paid at each stage. This is not an estimate this is an actual amount. Then since we know what the actual loss ratio is we can see how much is incurred at each stage. Then we can work out how much we expected to be incurred at each stage using the initial expected loss ratio. Then the difference between these two is the difference in declared profits. One is what actually happened and the other is the estimate. But the paid in both is the same because it is what was paid. I hope I answered your question.
Ah, I understand this one now - your explanations are very helpful and detailed. Thanks again for all your help in all these posts. I really appreciate your time spent. Leala
