Hello, I went through the solution for Qx6.2(ii) in details and still have questions remain. Very last page - Page 11 - of the solution, I could not follow the figures for: Cat. burning cost (Year 3) = £2.6%%SI <--how this was derived? Reasonable check- again I somehow lost and no clue how these number were derived: 35,835,000 <--- the text meant to be overall claim cost per policy form raw data , what it actually refers too? I could not derive myself 331,500 <--- unclear 11,317 <--- unclear Thanks very much!
I would take the catastrophe cost and divide by the total sum insured for year 3. Then multiply by 1,000 to express the result as an amount per £1,000 SI: 1,435,000/(10,700*53,900) * 1,000 = £2.49 This is slightly different to the solution, which gives £2.60. Perhaps they’ve used a slightly different method, but I’m sure my result would pick up the mark. 35,835,000 = 3,938 + 4,520 + … + 8,164, ie total gross claims 331,500 = 53,800 + 53,600 + … + 57,300, ie total number of policies 11,317 = (9,000 + 9,800 + … + 14,100)/6 ie the average of the average SI As it says in the solution, it’s a very crude calculation!
I've looked at this again. The solution uses the AY figures from earlier in the solution rather than the UY figures in the question. So 2.60 is 1,435,000/(10,250*53,750)*1,000. As long as you state your assumptions, either approach would be acceptable in my opinion.
