Sahasrabuddhe

Question 1

Three problems with current application of trend rates

Answer 1

1) Tend not to vary between accident periods
2) Trend that occurs in development period or calendar period direction often not considered
3) Tend not to vary by claims layer

Question 2

Two requirements of claim size models

Answer 2

1) Can be adjusted for inflation

2) LEVs and unlimited means can be easily calculated

Question 3

Sahasrabuddhe’s key finding

Answer 3

LDFs at different cost levels and layers are related to each other based on claim size models and trend

Question 4

Define R(X,Y)

Answer 4

Ratio between LEVs for layer X and Y at the end of development intervals

Question 5

Assuming R(X,Y)

Answer 5

R(a) > R(b) where a<b>= U, where U is the limit of R(a)</b>

If Y = GUU and if all development in unlimited layer occurs above X, then max R = U times LDF</b>

Question 6

Fully describe alternative calculation of R

Answer 6

R(X,Y) = U + (1-U)*Decay Factor

Ensures R is closer to 1 at early maturities and further from 1 at later maturites

Question 7

Five assumptions that must be met in order to implement Sahasrabuddhe’s reserving procedure

Answer 7

1) A basic limit is selected
2) Use of claim size model
3) Data triangle adjusted to basic limit and common cost level
4) Claim size models at maturities prior to ultimate
5) Triangle of trend indices