Q13
Hi there,
Wouldn't the loss elimination ratio for retrospective premiums be the excess ratio? And LDD plans would have the LER shown in the solutions?
Hi there,
Wouldn't the loss elimination ratio for retrospective premiums be the excess ratio? And LDD plans would have the LER shown in the solutions?
Comments
Hi again - sorry, I think I wrote this discussion thread too early..!
For questions b) and c), there was no mention of including the entry ratio's found in the table above, just the charges sequencing from 0% to 100% by 10%.
I understand that not including these entry ratios will not make the table reconcile perfectly, but how should I know when and when not to include the actual entry ratios from the table?
A retrospective plan pays out on all claims. The premium charged varies according to their loss experience. So a retrospective plan doesn't eliminate any claims. Whereas an LDD plan does eliminate a portion of the claims by transferring them back to the policyholder.
When you build a table M, limited table M, or table L, you must always include the entry ratios for the data points you have else your table will be inaccurate. You then need to pad the table with the any desired entry ratios that you don't already have. In this case the entry ratios in increments of 10%.