PE1 Question 15
In part b, we are asked to calculate the premium for LDD, and the solution uses table M. Should Limited Table M be used to calculate the risk charge instead?
In part b, we are asked to calculate the premium for LDD, and the solution uses table M. Should Limited Table M be used to calculate the risk charge instead?
Comments
Yes, ideally we would use a Limited Table M. However, it is reasonable to assume the Table M calculated in part a may be applied.
We can't derive a Limited Table M from the claim data given in the question because we only know the total loss and ALAE for each risk. We would need to know how this figure for each risk is broken down into individual claims.