Home
Flashcards
Preview
Siewert
Home
Get App
Take Quiz
Create
Advantages of high ded pgm
Price flexibility while passing add'l risk to large insd
Ameliorating onerous residual mkt charges
Cash flow advantages
Another vehicle to control losses
Allowing "self-insurance"
Loss ratio approach for high ded pgms
Definitions
P = Premium
E = ECR
χ = per occurence charge
ϕ = per aggregate charge
Concept
Total loss = PE
Excess loss = PEχ
Aggregate loss charge = PE(1 - χ)ϕ
When does it work
+ consistenlty tied to pricing
+ benefits from its reliance on a more credible pool of cpies
- ignores actual emerging experience (not useful late maturities)
- may not not properly reflect accnt characteristics
Implied dvpmt approach for high ded pgms
Develop full coverage losses
Develop deductible losses
Determine XS losses by differencing
+ provides estimate of XS loss at early maturities
+ more stable
- does not explicitly recognize XS loss dvpmt
Direct dvpmt approach for high ded pgms
Explicitly focus on XS dvpmt
+ uses XS loss experience directly
- quite leveraged, extremely volatile
- no estimate when XS losses have not emerged
Cred technique for high ded pgms
Ult L = Rpt * LDF * Z + Exp Ult * (1 - Z)
Z = 1 / LDF least to BF viewpoint
+ allows to determine liabilities either directly or inder
+ tie into pricing estimates
+ more stable
- ignores actual experience to extent of compl of cred
Dvpmt model for high ded pgms
LDF
L
= LDF ΔR
L
XSLDF
L
= LDF Δ(1 - R
L
)
LDF
t
= R
t
L
* LDF
t
L
+ (1 - R
t
L
) * XSLDF
t
L
where R = severity relativity, L - ded limit
Service revenue
Determine ultimate ded losses
Substract ult losses XS of aggregate limit
Apply selected loss multiplier
Determine total asset by substracting recoveries
Author
Esaie
ID
33919
Card Set
Siewert
Description
Exam6 by Esaie Siewert
Updated
2010-09-11T03:01:33Z
Show Answers
Home
Flashcards
Preview