Losses and LAE

Question 1

Losses

Answer 1

Amounts paid or owed to claimants under the provisions of an insurance contract

Question 2

claim

Answer 2

demand for compensation

Question 3

another name for reported losses

Answer 3

case incurred losses

Question 4

pure premium

Answer 4

aka loss cost or burning cost, a measure of the average loss per exosure

Question 5

basic limit

Answer 5

minimum amount of insurance offered corresponding to the limit associated with the base rate

Question 6

How does actuary determine the large loss threshold?

Answer 6

Best balance: include as many losses as possible and minimize the volatility in the ratemaking analysis

Question 7

What’s special about catastrophe losses?

Answer 7

A natural or man-made disaster that is unusually severe and results in a significant number of claims

Question 8

Why is catastrophe losses removed from ratemaking data?

Answer 8

Avoid distorting effects in any ratemaking analysis

Question 9

Non-modeled catastrophe

Answer 9

Generally undertaken on events that happen with some regularity over a period of decades

Question 10

What is catastrophe models used for?

Answer 10

Account for events that are extremely sporadic and generate high severity claims, such as hurricanes and earthquakes