Actuarial Science 363 DE
Assignment #2
SPRING 2009
Name: Yinghui Pei
ID: 20192186
9)
1.
Given the following data, calculate the indicated rate level change:
Acc.
Incurred
Development
Written
Earned
Weight
Year
Losses
Factor to Ultimate
Premium
Premium
Applied
2007
635,000
1.10
1,000,000
975,000
30%
2008
595,000
1.15
1,050,000
1,000,000
70%
–
Permissible Loss Ratio: 0.670
–
Proposed Effective Date: June 1, 2009
–
Effective Period for Rates: One Year
–
Policy Period: 12 months
P
Trend factor: 4% per annum effective
Apply the Loss Ratio Method here; note that the average accident dates of the accident
year and of policy year are July 1 and June 1, respectively.
For Year 2007
There are 35 months between July 1, 2007 and June 1, 2010
Expected Dollar Losses (Trended and Developed)
= 635,000*1.1*1.04
35/12
= 783,153.66
Assume the loss ratio based on the given earned premium is equal to the loss ratio based
on current premium.
Expected Effective Loss Ratio = 783,153.66 / 975,000 = 0.8032
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 Spring '09
 robertbrown
 1916, 1921, 1926, 1917, 1925

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