Conger & Nolibos

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  1. Dollar-based vs Count-based ULAE methods
    • Dollar-based assumes ULAE tracks w. loss dollars
    • Count-based assumes that same kind of transaction vost same amt of ULAE
    • Divergent assumptions may not affect results severely (only need to be correct for the avg)
  2. Classical pd to pd ratio for ULAE
    Generally assumes that 50% of ULAE occurs when clm is rpt, and 50% when it's closed
  3. Kittel's refinement for ULAE
    • Explicitely recognize the fact that ULAE is inc as clm as rpt, even when no loss pmt are made
    • Use ratio of pd ULAE to ½*(pd + inc)
  4. Generalized approach to est ULAE
    • Definitions
    • U1/2/3 = & of ult ULAE spent on opening/maintaining/closing
    • R/C/P = ult cost for clms rpt, closed, pd
    • W = ratio of ult ULAE to ult losses
    • M = total ULAE for period
    • B = loss basis for period
    • Formulas
    • M = (R*U1*W) + (P*U2*W) + (C*U3*W)
    • B = M / W
    • Final result
    • Approach similar to ELR: Unpd ULAE = (W** L) - M
    • Approach similar to BF: Unpd ULAE = W* * (L - B)
    • Approach similar to dvpmt: Unpd ULAE = M * (L / B - 1)
  5. Generalized approach to est ULAE
    Practical difficulties
    • Inconsistencies in the reporting of clm adj exp
    • Estimation of R and C may not be trivial
    • Ignores cost of reopening and reclosing
    • Loss inflation can cause material distortions
Card Set
Conger & Nolibos
Exam6 by Esaie Conger & Nolibos
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