B.01.Lee

Graphical representation of E(X)
Layers method to price ded & limit
ILFs vs frequency
- frequency does not matter for ILFs
ILFs properties
- I(k) is increasing at a decreasing rate
- Miccolis consistency test: marginal P should decr as limit decr
Inflation vs XS loss
Excess PP ratio φ(r)
Properties of φ(r) and Ψ(r)
- φ'(r) = -G(r) and φ''(r) = -f(r)
- charge is decreasing at a decreasing rate
- Ψ'(r) = F(r) and Ψ''(r) = f(r)
- savings increase at an increasing rate
Interpretation of Ψ(r) = φ(r) + r - 1
- If we charge rE(X) we lose (1-r)E(X)
- (1) φ(r) = insured loss above r
- (2) Ψ(r) = savings from losses below r
- For a correctly priced policy, r = 1 and φ(r) = Ψ(r)
Use of φ(r) and Ψ(r) for ratro rating
Retro rated policies w per accident limit
- F* ~ A* / E
- loss elimination ratio = k = (E - A*) / E

Author

Exam8

162744

Card Set

B.01.Lee

Description

The mathematics of excess of loss coverage and retrospective rating - A graphical approach

Updated

2012-08-14T17:10:34Z

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