You need to produce the input losses for a severity model.

i. Describe three methods for dealing with IBNER when producing such input.

ii. Explain the advantages and disadvantages of each method listed in (i).

iii. Calculate the IBNER factor from year of development, 2 to year of development, and 3 based on the following cohort of claims, using different types of average (weighted average, straight average, median) of the individual development factors, showing your calculations.

Development year 2 Development year 3 Development factor from year 2 to year 3 Outstanding ratio 1419 1419 1.00 0%

1809 1809 1.00 0%

1,041,681 1,332,408 1.28 99%

48,001 48,001 1.00 87%

111,808 111,808 1.00 0%

200,050 200,050 1.00 0%

30,494 2777 0.09 98%

149,398 228,689 1.53 42%

80,387 80,387 1.00 65%

9026 9026 1.00 0%

280 6819 24.36 81%

1419 1419 1.00 0%

978 978 1.00 0%

1355 1355 1.00 58%

iv. Explain the relative advantages/disadvantages of each of the three types of average mentioned in (iii) for the purpose of calculating IBNER factors.