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September 2012 Q8 reserving

N

Nicole890

Member
Hello,
I've attempted to search for a similar question on here but I still don't get it.
Question 8 part ii. I don't understand what I have to do here. I have both the revision booklet answers and the examiners report but still don't get the initial steps. Can some please walk me through it. I don't understand linear interpolation so this probably does not help.

Many thanks,
Nicole
 
Linear interpolation is assumed knowledge, you need to get to grips with it! However, it's not necessary for this Q. See Wiki for a nice easy formula.

Step 1: Work out the number of months between the given "as at" dates. (eg between 31/11/2007 and 31/05/2009 is 18 months)
Step 2: Calculate the incremental monthly development between each "as at" date. (eg for the 2007 UW year, between 31/11/2007 and 31/05/2009, monthly incremental development is (3267-1757)/18=83.889.
Step 3: Add on the requisite number of months' development to get the cumulative claims for a required "as at" date. (eg for the 2007 UW year, as at 31/12/2012, we get 1757+83.889*13=2848).

Repeat these steps to fill in the rest of the triangle. You should be able to take it from here.
 
MorningtonCrescent said:
Linear interpolation is assumed knowledge, you need to get to grips with it! However, it's not necessary for this Q. See Wiki for a nice easy formula.

Step 1: Work out the number of months between the given "as at" dates. (eg between 31/11/2007 and 31/05/2009 is 18 months)
Step 2: Calculate the incremental monthly development between each "as at" date. (eg for the 2007 UW year, between 31/11/2007 and 31/05/2009, monthly incremental development is (3267-1757)/18=83.889.
Step 3: Add on the requisite number of months' development to get the required "as at" dates. (eg for the 2007 UW year, as at 31/12/2012, we get 1757+83.889*13=2848).

Repeat these steps to fill in the rest of the triangle. You should be able to take it from here.
Click to expand...
Hi, thanks for the really speedy reply.
That makes more sense now, however I'm unsure what to do for 2010 development year 1. What do we add the 22.733*12 to?

Thanks again!
 
??? 22.733 applies to the 2007 UW year, not 2010.

You need to use a little common sense. Claims at time 0 are nil. So you don't add the incremental claims onto anything!
 
Katherine Young said:
??? 22.733 applies to the 2007 UW year, not 2010.

You need to use a little common sense. Claims at time 0 are nil. So you don't add the incremental claims onto anything!
Click to expand...

Ok, but where are the incremental claims from? There's nothing given for uw year 2010 for before 31/03/11? Do I need to go backwards or something?
Thanks :)
 
Cumulative claims as at 1/1/2010= 0. Cumulative claims as at 31/03/2011 = 3039. That's 3039/15 = 202.6 per month. So 202.6*12=2432 after 12 months, as at 31/12/2010.

We're assuming linear development, which is pretty spurious but the best we can do.

It sounds like you're still struggling a bit with triangle questions. Why not get the ASET, where we take you through everything step by step.
 
I also think you need to develop the skill of playing around with the numbers in front of you. You could have worked this out just by plugging a few things into your calculator and seeing what comes out. It would have been quicker than asking someone else to do it for you.
 
Katherine Young said:
Cumulative claims as at 1/1/2010= 0. Cumulative claims as at 31/03/2011 = 3039. That's 3039/15 = 202.6 per month. So 202.6*12=2432 after 12 months, as at 31/12/2010.

We're assuming linear development, which is pretty spurious but the best we can do.

It sounds like you're still struggling a bit with triangle questions. Why not get the ASET, where we take you through everything step by step.
Click to expand...
Got it! Thanks. It's got to that stage where everything is a bit of a struggle.
 
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