Sahasrabuddhe

Question 1

Two requirements of the claim size model

Answer 1

1. Claim size model parameters can be adjusted for the impact of inflation
2. Limited expected values and unlimited means can be easily calculated

Question 2

By assuming that Rk<1, we obtain 3 properties

Answer 2

1. A early maturities, there will be less development in the excess layer, resulting in an R ratio close to 1
2. Rk>=U. U is the Rk at ultimate. because there is more development associated with the denominator of R (claims in layer B) than the numerator of R (claims in layer X)
3. If B is unlimited and if all development in the unlimited layer occurs above X, then the maximum value for R is calculated as U times the unlimited claims development (violated by negative development or if excess layers developing more quickly than working layer)

Question 3

Model assumption

Answer 3

1. the procedure requires us to select a basic limit
2. the procedure requires the use of a claim size model
3. The procedure requires that the data triangle be adjusted to a basic limit and common cost level
4. The procedures requires claim size models at maturities prior to ultimate (difficult)
5. The procedure requires a triangle of trend indices (difficult)

Question 4

Differences are greater for larger expected unlimited claim size which increases the expected loss in the layer between the basic limit and new limit

Question 5

Differences are greater where trend and/or loss development act over longer time periods (long-tailed lines) or when the loss trend is higher