Answered step by step
Verified Expert Solution
Question
1 Approved Answer
2. Allison and Cole are to calculate loss reserve using the chain-ladder method and the following loss development factors: Loss Development Factors of Successive
2. Allison and Cole are to calculate loss reserve using the chain-ladder method and the following loss development factors: Loss Development Factors of Successive Development Accident Year Years 0-to- 1-to-2 2-to-3 3-to-4 4-to-5 5-to-6 1 2012 1.83 1.35 1.12 1.05 1.04 1.01 2013 1.65 1.23 1.09 1.05 1.02 2014 2.01 1.33 1.14 1.08 2015 1.74 1.28 1.07 2016 1.85 1.23 2017 2.08 Allison thinks it is most appropriate to use 3-year arithmetic average paid loss development factors to develop losses. Cole disagrees and thinks they should use a 2-year arithmetic average instead. The cumulative paid losses through Development Year 0 for AY2018 claims is $100,000. Determine how Allision's estimate of loss reserve as of December 31, CY2018 for AY2018 claims will differ from Cole's.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started