Graham
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If annual policies are written uniformly over the year then the average written date for a particular calendar year, say 2023, is the middle of the year, Jul 1, 2023. You can also get there by calculating the average earned date first, which would b…
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Have you seen this thread on that question: https://www.battleactsmain.ca/battleacts5.ca/forum5/index.php?p=/discussion/69/spring-2015-q5b If that doesn't clear up your question, let me know. Otherwise, I would need to see your calculations.
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Does this answer your question: https://www.battleactsmain.ca/battleacts5.ca/forum5/uploads/561/21OKGFBHVHZX.png You can also check the Excel version of this type of problem on the BattleActs PowerPack. That way, you can look at the formulas.
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You're right in noting the somewhat circular logic: The Bornhuetter-Ferguson (BF) method requires trended data to estimate ultimate losses, but the net trend itself is based on ultimate losses. This is an example of the complexities involved in actu…
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I will need to review this problem and get back to you.
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Thx! We will do this the next time we upload the BattleCard database.
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I'm not sure what the solution is referring to when they say "loss ratio approach". I would ignore sample answer 1 and instead use the "fitted curve" or "GLM" answer since several of the sample answers mentioned those.
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I would need to see the given information and the rest of the solution before I could answer. Can you include a link to where you got this?
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It's (Loss + LAE)/exposures and LAE includes both ALAE and ULAE. (You wrote ALAE in your formula, which is incorrect.)
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It means that if 2 people have materially different credit scores then their loss costs will also be materially different. In other words, differences in credit scores are a good predictor of differences in loss costs.
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Your explanation is correct. If the overall rate change is 6.6% but you want to the change to be revenue-neutral then you have to "back out" the 6.6%. You do that here by multiplying the base rate (which isn't given) by the inverse of the …
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There is no other option. The only way to get the overall change is to weight the relativities by exposures. You never just take a simple average. The 2017 problem didn't specifically tell you to take an exposure-weighted average but it was the only…
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A simple example that demonstrates the concept behind off-balancing is this: Suppose you are doing a relativity analysis but want a revenue-neutral rate change. When you calculate the new relativities, you find that the result causes a +5% overall c…
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The current annual rate is $1,000 because you are told the current rate is $500 for 6-month policies. Just multiply that by 2. The loss ratio method is acceptable according to the examiners' report: https://www.battleactsmain.ca/battleacts5.ca/forum…
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The question states "projected" cat load of $235 per exposure so I assume it has already been trended forward to the appropriate period.
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The exposures are trended from the middle of 2017 to the middle of the period that the reinsurance contract covers which is the middle of 2019. That's 2 years. (The effective date of the rate change isn't relevant.)
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(Note: I didn't notice they gave a separate exposure trend of 3%, which just happened to be the same as the 3% pure premium trend.) In any case, when you apply the 3% pure premium trend, this accounts for trends in the losses and exposures at the sa…
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"Why do we want to bring losses to the uncapped level..." The question (part b) asks for the overall rate change. For that you need to use all the data. Then when you do a relativity analysis, you can calculate the excess loss factors and …
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You're welcome!
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Q1: Why is the AAD of the effective period = Jun 30 2013 used? You're forgetting that in this problem you're told that all policies are written on Jan 1, 2013. That means they all expire on Dec 31, 2013 so the AAD is the middle of the year. (Usually…
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I think a valid solution would be NOT applying the exposure trend to the premiums in the denominator because the statement of the question wasn't completely clear. Let me explain: An exposure trend of 1% means you have 1% more policyholders. If you …
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First note that all policies are annual and are written on Jan 1. That means the average accident date for AY 2010 is Jun 30, 2010. (Not Jan 1, 2011, which it would be if policies were written uniformly over the whole year.) The solution in the exam…
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The reason the benefit changes have to be applied to all years is that the given ultimate losses are all given at the old benefit levels. Apparently when their actuary estimated the ultimate losses, they did everything at the old benefit levels so y…
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Suppose you have these 2 policies that are the same in every way except for the coverage limit and the premium: Policy A: coverage limit = 1 million premium = $1,000 Policy B: coverage limit = 2 million premium = $1,300 If you use both policies in a…
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There is no unlimited severity trend given so you couldn't apply that anyway. Also, the severity trend of 1.05 is only applied to the LAE portion. (The LAE portion is not subject to an excess loss factor, and would be nowhere near $500,000 for a sin…
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You're right that the change in frequency from 2011 to 2013 is -10%, and then flat after that but the question only asks you to trend AY 2013, 2014, 2015, which is AFTER the frequency stabilized at about 0%. I don't see any significant change in the…
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Theoretically it shouldn't matter whether you apply trending or development first, but for practicality, it's probably simpler to do development first, then trending. Reason: If you applied trending first, you would have to do it for every cell in t…
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For loss trending, yes, use AADs. For step 1 of 2-trending for losses, the formula is similar to the step 2 adjustment factor: (untrended losses) x (1 + trend)^(trend period) See this old exam problem: https://www.battleacts5.ca/pdf/Exam_(2018_2-Fal…
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Your calculation of P36/V36 is correct but you should have used the adjusted exposures in cells O33:O35. It looks like you used the original exposures. You calculated the adjusted exposures correctly in N19:P19 so use those instead and you should ge…
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You aren't actually given a separate exposure trend here. You're given a pure premium trend and the pure premium trend is indeed applied in column (c) of the examiners' report solution. When the graders said a common error was applying an exposure t…