Hello all, Wondering if you could help me to understand why the loss ratio is adjusted for inflation for 6.5 periods Jul 98: 75 × 1.005^ 6.5 in April 1999 - UPR Question 11 part (iii) Thank you!
Hi there I am afraid there is an error in the solution in the Examiners' Report. You need to inflate from the average date of payment relating to the loss ratio you have been given, which is 30 June 1997 (as it is a 1997 accident year loss ratio) to the average date of payment of the unexpired risks as at 30 June 1999. For the business written in July 1998, as at 30 June 1999, it will be 11.5 months earned and 0.5 months unearned. Therefore the average date of payment from the unexpired risks as at 30 June 1999, will be 0.25 months after 30 June 1999. Hence the total period to inflate for is 24.25 months. Similarly for business written in August 1998, as at 30 June 1999, it will be 10.5 months earned and 1.5 months unearned. Therefore the average date of payment from the unexpired risks as at 30 June 1999, will be 0.75 months after 30 June 1999. Hence the total period to inflate for is 24.75 months. Similarly for the other months....
