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Yes, that's a good summary.
The expense ratio, e, covers all expenses so loading for ALAE via c would double count. Whereas the expense portion of basic premium doesn't include ALAE so you need to load E[A] for ALAE.
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The given exposure distribution is the distribution of possible losses including the possibility of no loss occurring. The exposure distribution used in the Bernegger paper is the severity distribution, which is why we condition on a loss occurri…
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You're not misunderstanding. You can view it as two bullets:
• Different locations
• Different equipment
We combined the two bullets into one for compactness in the wiki.
The ISO CGL manual ( in Differences between insureds in same class Comment by admin September 2022
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These questions can be a bit tricky due to the ambiguity. The expense ratio is the insurers expense provision as a ratio to standard premium. It covers ALAE and ULAE as well as general expenses. It's not the same thing as the expense portion of b…
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Hi,
It is actually in the question this time but the volume of material given in this IQ makes it hard to keep track of things. It's even worse in the Excel environment when you have to scroll incessantly or zoom out and squint.
As a …
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Yes, the umbrella policy covers 1 million of losses which is usually the layer 1m to 2m unless the insured has exhausted their aggregate retention. In that case, the umbrella policy still covers 1 million of losses but for the layer 0m to 1m. The…
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It's worth remembering that in 2022 this is a question from a paper that is not longer on the syllabus. Currently, the syllabus and GLM text indicate you should be thinking about this question in terms of correlation and multi-colinearity. Intrin…
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This is subtle. The key here is to read closely and notice there is no mention of the intercept which is usually denoted by the coefficient beta_0.
Intrinsic aliasing means the model is over-specified. We can see that here because we have a…
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The main purpose of a surplus share treaty is to limit the reinsurer's exposure to a risk. The insured value of a risk refers to the primary insurer's exposure. As the insured value becomes increasingly large compared to the retained line + numbe…
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The CAS accepted a lot of different answers to this question and not all of them are laid out in a consistent manner. Let's look at the Industry Type variable and recall what we know about base classes.
The output for a categorical variable…
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Yes
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We're trying to say the same thing. For a given event covered by the policy, the per-occurrence limit is $100k and the aggregate limit is $200k for that event. The event itself could be a fire, advertising injuries, or something like a recall of …
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Yes, the NCCI circular became part of the syllabus starting in Fall 2020. Since the CAS is no longer releasing the exam questions we're unable to provide old exam questions for this reading.
The concepts are similar to the old NCCI retrospe…
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It's better to say 100k per claim per type of cost (except for med), and 200k in aggregate over a policy year.
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The wording of the question is a bit vague here because it doesn't tell us the type of claim. In general, the basic limit for a claim is $100,000 except for medical expenses which are $5,000. The aggregate limit of $200,000 applies to a claim whe…
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Yes, we can do this within the next week.
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You're right, it should say per exposure rather than per policy. The wiki has been updated and we've clarified example 6.3, thanks.
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Yes, that's correct.
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The American Academy of Actuaries "Risk Classification Statement of Principles" is no longer on the syllabus. It was replaced by ASOP 12.
We recommend attempting this problem in the context of ASOP 12 by arguing either for or against the r…
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We're continuously making tweaks to improve the site for everyone. The Qz-10 questions are no longer labelled as Qz-10 but should be available if you are in the wiki and clicking on the Full BattleQuiz links.
If this isn't working for you o…
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The source material is ambiguous on this topic. However, based on the source for disease limitations, you should first apply the state per-claim accident limitation, then split into primary and excess losses, before finally reducing the med-only …
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Yes, the general assumption is if the claim is below the deductible then it's not reported to the insurer so the insurer won't incur any of the ALAE expenses that would otherwise have been associated with the claim. In practice, for some lines of…
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You are correct with N = 2, Delta = 3 and Z1 + Z2 = 1. To solve for Lambda you need to write out the Lagrange multiplier equations. Try applying the solution found in the linked PDF below to this problem then let me know if you're still stuck.
Thanks for pointing this out. While the CAS does have a history of asking questions based on footnotes I think you're okay here with knowing the Gini index isn't equal to the AUROC.
Correct, with a retrospective rating plan the insurer pays all losses (the full $150k claim) and then bills the insured for additional premium if the ratable loss amount has increased since the last time the policy was assessed.
The CAS highly recommends reading the material in chapters 1-4 as they assume familiarity with it. However, our current opinion is if you have a reasonable grounding in statistics then your time is better spent elsewhere.
The general trend…
Think about the number of ways you can make a multiple of the layer using claims from within the layer. In essence, if you try making a multiple using claims from lower down in the layer then you need more of them to reach the multiple. However, …
This is the graph of the cumulative distribution function for aggregate claims, i.e. y = F_S(x) where x is the aggregate claim amount (total claim $).
All three of your points are correct.
The syllabus has changed materially since 2014 and the current Fisher reading says it is optional whether you include the cost of the per-occurrence limit within the basic premium.
My second poi…
Thanks for calling this out as there are a couple of things going on here.
Firstly, there is a small typo in that formula, the second term should be (c-1)E[A] to reflect we're removing all loss adjustment expenses associated with the retro …