- TIA EXAM 5 - FRIEDLAND CH 07

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CDP
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75492
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- TIA EXAM 5 - FRIEDLAND CH 07
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2011-03-27 16:40:53
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TIA EXAM FRIEDLAND
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- TIA EXAM 5 - FRIEDLAND CH 07
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  1. When calculating the averages of age-to-age factors, what is the stability vs. responsibility trade-off?
    Most recent experience is most likely to reflect effect of latest changes in environment

    Greater number of experience periods will increase stability
  2. What should be reviewed when selecting development factors?
    • Smooth progression of age-to-age factors across dvt periods
    • Stability of age-to-age factors for same dvt period
    • Credibility of experience
    • Changes in patterns
    • Applicability of historical experience
  3. Describe the process of selecting the tail factor in the reported development technique?
    • When data is available, analyze dvt out to where data ceases
    • When most mature dvt period in data has factors greater than 1.0, actuary has to determine tail
    • Limited availability of data makes selection difficult
    • May increase/decrease due to trends in cum injury or settlement practices
    • Tail affects unpaid estimate for all AYs so crucial to be right
    • Can use: Benchmarks, Fit exponential decay curve, and
    • For Pd dvt, when Rpt dvt is ultimate, use rpt-to-paid ratio at latest observed Pd period
  4. Common that dvt increases as Retention increases.What does RAA suggest that increase due to?
    • Late reported clms
    • Increases in avg reported loss per claim
    • Changes at successive maturities in the proportion of claims with losses which are large multiples of ave (Shape of size of loss distn changes at successive valuations)
  5. P&G model that illustrates increase LDFs as retention increases shows what 2 influences underlying clm dvt?
    • 1 - Rpt pattern of claims over time
    • 2 - Changing characteristics of size of claims distn at successive maturities

    without influence, dvt factors for clms excess in excess retentions would be same

    => Retention is a major factor inestimating discounted losses using paid dvt factors
  6. Changing product mix: Personal auto 5% increase, Comm 30% rate increase
    • Comm auto has longer rpt pattern so higher age-to-age
    • Increased Comm volume increase Age-to-age
    • IBNR is understated
    • Take 3-yr ave instead of 5-yr is better but not best
    • Rpt dvt more responsive than Pd dvt due to shorter time frame for rpt than paid

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