An insurance company X has been writing a mixture of EL and PL business (roughly in the same proportion) over the last 10 years. The summary statistics (for the last 6 years only) are as follows:

Policy year

(incepting at 1/1)

Premium written during the year (all annual policies)

Rate change with respect to the previous year Claims incurred during policy year 2006 £1.45M N/A £1.53M 2007 £1.50M +3% £1.15M 2008 £1.80M +5% £1.25M 2009 £1.75M +7% £1.67M 2010 £1.90M -2% £1.05M 2011 £1.95M 3% £0.41M Source: Summary statistics as of 31 December 2011.

The premium expected to be written in 2012 is £2M, and there are no planned rate changes. Based on your experience, you expect that as a result of IBNR, 2011 is only 30% complete, 2010 is 80% complete, 2009 is 95% complete, and the previous years are 100% complete.

What is the expected (incurred) loss ratio for policy year 2012? What are the expected losses?

Remember that the loss ratio is defined as

(Incurred l) oss ratio = claims incurred p/ remium earned Also note that the loss ratio is defined in terms of the earned premium, whereas the table above gives the written premium. You can assume that the claims inflation is 5%. State all other assumptions you make.