Siewert

Question 1

Loss Ratio Method

Total Ultimate Excess Loss

All Formulas

Answer 1

Ult Excess Loss (above deductible) = Prem * ELR * Per Occurrence Charge
Ult Excess Loss (above aggregate limit) = Prem * ELR * (1 - POC) * Per Aggregate Charge
Total Ult Excess Loss = sum of the 2

Question 2

Loss Ratio Method

Pros/Cons of LR Method

Answer 2

Advantages:
* Works well with immature years where data is sparse/nonexistant
* May be more creidble due to industry data

Disadvantages:
* Ignores actual loss emergence
* May not property reflect account characteristics (if exposures written don’t match the exposures used to determine ELR and excess ratios)

Question 3

Implied Development Method

Ultimate Excess Loss

All steps

Answer 3

1. Calculate ult unlimited losses using CL method
2. Calculate ult limited losses using CL method
3. Ult excess loss = (1) - (2)

Question 4

Implied Development Method

Pros/Cons of Implied Development Method

Answer 4

Advantages:
* Incorporates actual loss emergence
* Provides an estimate of XS losses even when excess losses have not emerged (early maturities)
* Development factors for limited losses are more stable vs XS losses
* We also get ultimate limited losses, which will be used in calculate service revenue

Disadvantages:
* Not explicitly recognizing excess loss development