13.4 Past Exam Questions
Past question mostly focus on:
The 7 problems of reinsurance loss reserving
Using the SB and credibility IBNR method
Concepts
1996 #10: Problems of reinsurance reserving
1999 #9: Partition consideration
1999 #10: Fidelity proportional is short tail
2000 #68 b c: SB incorporates reported loss in the ELR but difficult to adjust ELR to a prior estimate for each year
2001 #54: pros and cons of CL and BF
2002 #42: SB vs BF similarity and difference
2004 #49 c d: SB vs BF pros and cons
2006 - #45: Which method to use SB vs CL
2007 - #21: Discuss how SB is a special case of BF 59
\(\star\) 2008 - #35: Reason of report lag and upward development due to modal value claim reserve
\(\star \star\) 2008 - #37: Industry data vs internal
Industry: thin internal data; volatile from rate changes; rate change history not credible; shift in underlying policies so historical no reliable
Internal: Rate change not reflected in industry; industry composition different from reinsurer; Underlying policies not represented in Sch P data; believe data is credible and representative of the specific business involved
\(\star \star\) 2009 - #32: How to partition data
Fac vs treaty \(\Rightarrow\) LoB; Don’t split by cedant as data too thin
Diagnostics: Look at reporting pattern and amount of data for credibility; discuss with u/w and claims
2011 #10 b: SB pros and cons
2011 #11: report lag; upward development; standard method not work; industry data not work
2012 #10 b-d: SB vs CL
2012 #11: problems of reinsurance reserving
2013 #10 c: SB vs CL
2014 #13: problems of reinsurance reserving
\(\star\) 2015 #12: Discuss problems of reinsurance reserving based on data given
Reporting lag (claims below reporting threshold)
Persistent upward development (upward development of ALAE by looking at ALAE/Loss ratio)
Heterogeneity patterns (each AYs have different retention)
2015 #13 b: Reason to adjust EP for SB (e.g on-level so LR for each AY is comparable, adjust for varying rate as SB assumes constant ELR)
2016 #17:
2 of the 7 problems with reinsurance reserving
Describe the cause of each
\(\star\) TIA 2: LoBs groupings considerations
Calculations
1997 #11: SB (Use adjusted on-level premium)
1998 #35: IBNR with CL, BF, SB
2000 #68 a: SB
2001 #53: SB
2003 #44: SB
2004 #49 a b: CL and SB
2005 #38: SB
\(\star\) 2007 - #3: Credibility weight SB and CL, remember to use \(Z_k = p_k \cdot CF\)
2007 - #22 a b: CL and SB
2008 - #36: SB
2009 - #31: SB
\(\star\) 2011 #10 a c: SB and credibility weighted
- Shorthand on getting SB IBNR by \(ELR \times (\text{total adjusted premium} - \text{total used up premium})\)
\(\star \star\) 2012 #10 a: SB method, need to consider age of policy on risk attaching vs loss occurring basis, also take out expense from premium
2013 #10 a b: SB and credibility weighted SB and CL
2014 #14: SB
2015 #13 a: SB
2016 #16:
SB
Credibility weighting
TIA 1: Standard Buhlmann and credibility IBRN
$star$ Remember to use the on-leveled premium and remove commissions and brokerage and internal expenses (So pure premium)
\(\star\) credibility factor is applied to the \(p_k\)