As far as we know, there isn't a historical problem which applies rule 8 in the CAS released exam questions. Nor is there a worked example of one in the source material.
I'd say this is fringe material. It's hard to say what a question would look like but it might say something like the risk class has an expected loss ratio of 60% while the risk being rated has an expected loss ratio of 65%. Then you'd calculate the experience mod as you usually would, multiply it by the manual premium for the class, and then multiply by 60%/65%.
Thank you. Just so I understand, let's take a look at Exam 2012 Q14. Here, the expected loss ratio being rated is 70%. Correct?
In order to apply Rule 8, the question would need an additional bullet point stating that the risk class has an expected loss ratio of say 65% to use this rule?
You're correct, the question gives us the actual expected loss ratio for the risk, not for the risk class. So we need an additional bullet point stating the ELR for the risk class to apply rule 8.
Comments
As far as we know, there isn't a historical problem which applies rule 8 in the CAS released exam questions. Nor is there a worked example of one in the source material.
I'd say this is fringe material. It's hard to say what a question would look like but it might say something like the risk class has an expected loss ratio of 60% while the risk being rated has an expected loss ratio of 65%. Then you'd calculate the experience mod as you usually would, multiply it by the manual premium for the class, and then multiply by 60%/65%.
Thank you. Just so I understand, let's take a look at Exam 2012 Q14. Here, the expected loss ratio being rated is 70%. Correct?
In order to apply Rule 8, the question would need an additional bullet point stating that the risk class has an expected loss ratio of say 65% to use this rule?
Thank you!
You're correct, the question gives us the actual expected loss ratio for the risk, not for the risk class. So we need an additional bullet point stating the ELR for the risk class to apply rule 8.