Dissues the possible economic problems associated with the continous rise in Mexico's population.

The following table shows pure loss cost Increased Limit Factors for a class of business. Limit ILF 100,000 1.00 200,000 1.47 500,000 2.05 1,000,000 2.68 1,500,000 3.03 2,000,000 3.18 (1) Calculate the ILFs for the following two layers: (a) 1 million xs 0.5 million (b) 1 million xs 1 million [1] An underwriter has asked an actuary to analyse two different possible sets of contract terms for a proposed liability insurance contract: Option A - 1 million xs 0.5 million for a premium of 20,000 Option B - 1 million xs 1 million for a premium of 10,000 (ii) Determine which option appears to be more profitable, using the ILF table provided. [2] (iii) Suggest further comments that the actuary might make to assist the underwriter. [3] The actuary wishes to use the ILFs in the table to price a three-year contract starting on 1 January 2011 but discovers that the ILF curve was specifically built for calendar year 2009. Claims inflation has been 5% per annum on average in recent years. (iv) Stating any assumptions you make: (a) Calculate revised ILFs for limits of 100,000 and 200,000; and (b) Calculate the ILF of layer 100,000 xs 100,000 for this contract