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In your set up you are asking for the probability of the reinsurer returning excess profit to the primary insured. However, the question is asking for the probability that the reinsurer does not make a profit.
Notice this is not as straight…
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The CAS didn't provide the necessary tables for the NCCI reading in the study kit for this sitting. They haven't provided any guidance as far as we know on what candidates are supposed to do. It seems reasonable to expect they would have to give …
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We're told we have a 25% quota share treaty which applies to 10m of subject premium. So the ceded premium is 2.5m. We're also told the ceding commission is 20%, so the reinsurer premium net of ceding commission is 2m = 2.5m - 2.5m*20%.
The …
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We're both perhaps guilty of complicating this problem. The solution depends on keeping track of the perspective (primary insurer, quota share reinsurer, XoL reinsurer etc.)
Let's assume we have a 20m loss
The 40% quota share inures t…
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We're glad you found the exercise helpful; it's certainly a great way to strengthen your understanding in readiness for the IQ problems and situations you'll encounter in your day to day work.
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This is an interesting question thanks. From what I can tell your approach to re-basing in terms of the expected limited distribution works. My question is why would you want to do this given we already have the Table L approach - does this add a…
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Good call out. It should be included in the modified severity calculation - we inadvertently followed Bahnemann's Example 6.7 a bit too closely.
We've updated the wiki, Excel files and PDFs to properly include the fixed ALAE in the modified…
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We greatly appreciate you pointing this out. It was an error on our part. You have the correct balance equation values and we have updated the sub-table excerpt in the Excel files and PDF. You may need to clear your browser cache to get the new E…
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This is a great question and one for which in general we don't have a definite answer as reinsurance contracts are structured to suit each individual client's situation.
For your example above, the second version is correct in our opinion. …
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Thanks for pointing this out. Our system was originally designed for Exam 6 where there is a lot more repetition of exam questions than Exam 8. We've taken this feature down until we can get it working properly.
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This is very hard to say given the CAS isn't releasing exams and candidate feedback to us and in general is restricted. The CAS does say they can draw on any material from prior exams - though this seems like a really niche piece of knowledge giv…
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I think the point I was trying to make is the earned premiums should account for other differences between risks across territories - such as one territory favoring younger drivers than others. The territory factor itself shifts the average premi…
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It's difficult to have a prescriptive formula for either retrospective rating or large dollar deductible policies as so much depends on the characteristics such as whether there's a per-occurrence limit/deductible, aggregate limit/deductible, min…
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You raise excellent, well considered arguments that are probably a bit too deep for what appears to be a lesser syllabus exam reading. Your comments certainly seem to follow Hazam's logic regarding maldistribution. In 2011 Q1 we are using earned …
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Great question. The Fisher text and CAS place students in a somewhat unfortunate situation here as Fisher speaks broadly to the balance equations when the tax multiplier, T, equals 1.000. Further, Fisher doesn't clearly outline how the balance eq…
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Thanks for pointing this out. You're correct - we've amended the wiki to make it clear you're either applying Table 15 (the usual situation) or Table 11 LDFs (when you have an incomplete policy year).
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I believe the piece you are missing here is that Table 2 - 3 years credibility refers to policies with merit rating group A only (at least 3 years claims free).
The broad picture from both Bailey & Simon and Fisher is the more variation…
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It is highly, highly unlikely that the tables given in your actual exam environment will be those that are visible in the sample Pearson Vue question for Exam 8.
It's much more likely they will give you any needed tables f…
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Great question thanks. There's not really a satisfactory answer here as it all depends on the exact wording of the treaties/question. Unless the question explicitly says one treaty inures to the benefit of another treaty or there is clearly no ov…
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The CAS website says "For Exams 5, 6-Canada, 6-International, 6-United States and 8: pure written response questions (no numbers or formulas) will be asked in a non-spreadsheet form."
They haven't given any other information and the Pearson…
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In our opinion this topic is quite unlikely but is possible in a very small example. We should probably revisit the wiki text to place less emphasis on memorizing the formulas for EPV and VHM as they're sufficiently complicated that hopefully the…
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It's difficult to say with any level of confidence what the CAS might do in this situation because of the limits the CAS has placed on discussing the exams.
Looking at the functionality available in the CAS sample on the Pearson website, it…
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This question can definitely be solved using the Table L method. It's likely the CAS expected most candidates to take the "easier" route of pricing the per-occurrence and aggregate deductibles separately though.
When using the Table L metho…
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The key here is to understand what the insurer is offering. With a large dollar deductible policy the insurer is offering both coverage and services as they service all claims and seek reimbursement for the deductible losses. Whereas with an exce…
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The payback approach hasn't been explicitly mentioned as a learning objective on the syllabus in a while. However, it continues to be part of the Property Catastrophe section of the Clark paper and so is definitely fair game in an exam.
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The tables are contained in the CAS Exam 8 Study Kit which we are unfortunately unable to fully reproduce for copyright reasons. The study kit is available for purchase on the CAS store.
We are working towards providing sample excerpts for …
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Thanks for bringing this to our attention. At this point we'd prefer not to hand out the protection password and we're looking into ways to allow Ctrl-H within a protected sheet (seems to be an Excel flaw).
You should be able to highlight m…
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The key to this is to use the relationship shown in the PDF for calculating the insurance savings from first principles in the Fisher.AggExcess wiki. Namely, if Y = pX+b then f_Y(y) = 1/ |p|*f_X( (y-q)/p).
Here X is uniform on [a,b] so E = …
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Hi,
Anti-selection is not explicitly covered in the Bahnemann reading. However, you should remember the higher exams can draw on any material covered in previous (lower level) exams and interweave it with the reading material.
In thi…
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This question spans several readings, namely Bahnemann, Clark (Casualty Per Occurrence section) and Bernegger. Thinking about it, this question fits the Clark reading the best, so we'll move it there shortly.
We can't use the formula you re…