Spring 2015 #16
For part a (IRIS 11) why is the one year loss reserve development calculated as the incremental change in incurred? Isn't this ignoring the payments made on those prior year reserves? TIA!
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For part a (IRIS 11) why is the one year loss reserve development calculated as the incremental change in incurred? Isn't this ignoring the payments made on those prior year reserves? TIA!
Comments
incurred1 - incurred0 = paid1 - paid0 + reserve1 - reserve0
= reserve1 - [reserve0 - (paid1 - paid0)]
Calendar year paid reduces the original reserve. The difference of this reduced original reserve and the ending reserve is considered the reserve development.
For part e of this question is there a reason that the 5 year historical exhibit is included but no other financials like Schedule P or Schedule F are included? When I was doing this practice problem I put schedule P with the limitation of it only showing 10 years of data so it isn't as useful for looking at trends in longer lines of business and would think this should get credit but the examiners report doesn't even mention anyone using that.
I was also trying to figure out what section of the wiki might be most applicable here and it seems like this part of this question actually falls under Odomirok.21-Tools (?) but the wiki for that says that there have been no questions on this material, so I'm a bit confused as to whether that was an oversight or if I'm mistaken on this. In this section of the Wiki Schedule P is explicitly mentioned so it feels like my Schedule P answer should absolutely work for this question but any guidance on this would be very helpful.
Thanks in advance!
The sample gives Annual Statement as an accepted answer; the schedules (P, F and others) are part of the AS.
Schedule P showing 10 years is not really relevant to solvency status. They give a couple of accepted answers.
For question a, how to calculate the one-year reserve development of 18,000?
Subtract the 2012 column from the 2013 column of Part 2, except for the 2013 row.
Each row is for an accident year. Column 2012 gives the ultimate loss of each accident year evaluated as of 12/31/2012. Similar for column 2013. 2013 accident year is new; it is not included in reserve development.
For Iris 11, why not just subtract the Loss & DCC reseves they give (125000-103000=12,500)?
Are these possibly Gross of Reins and we need the NET reserves?
Thanks
One-year development is the change in ultimates (Part 2), not in reserves.
For IRIS 13 can someone please explain how they got to 106 and 121 in the numerator of ratios A and B?
Follow the instructions in IRIS 13 text.
An average developed reserve ratio to premium is applied to current year premium, and from this, current year undeveloped reserve is subtracted, giving the reserve deficiency/redundancy.