Conger & Nolibos

Dollar-based vs Count-based ULAE methods
- Dollar-based assumes ULAE tracks w. loss dollars
- Count-based assumes that same kind of transaction vost same amt of ULAE
- Divergent assumptions may not affect results severely (only need to be correct for the avg)
Classical pd to pd ratio for ULAE

Generally assumes that 50% of ULAE occurs when clm is rpt, and 50% when it's closed
Kittel's refinement for ULAE
- Explicitely recognize the fact that ULAE is inc as clm as rpt, even when no loss pmt are made
- Use ratio of pd ULAE to ½*(pd + inc)
Generalized approach to est ULAE
- Definitions
- U_1/2/3 = & of ult ULAE spent on opening/maintaining/closing
- R/C/P = ult cost for clms rpt, closed, pd
- W = ratio of ult ULAE to ult losses
- M = total ULAE for period
- B = loss basis for period
- Formulas
- M = (R*U1*W) + (P*U2*W) + (C*U3*W)
- B = M / W
- Final result
- Approach similar to ELR: Unpd ULAE = (W^** L) - M
- Approach similar to BF: Unpd ULAE = W^* * (L - B)
- Approach similar to dvpmt: Unpd ULAE = M * (L / B - 1)
Generalized approach to est ULAE
Practical difficulties
- Inconsistencies in the reporting of clm adj exp
- Estimation of R and C may not be trivial
- Ignores cost of reopening and reclosing
- Loss inflation can cause material distortions

Author

Esaie

33888

Card Set

Conger & Nolibos

Description

Exam6 by Esaie Conger & Nolibos

Updated

2010-09-11T01:58:07Z

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