Fisher.AggExcess
Reading: Fisher, G. et al, "Individual Risk Study Note," CAS Study Note, Version 3, October 2019. Chapter 3. Section 1
Synopsis: To follow...
Study Tips
...your insights... To follow...
Estimated study time: x mins, or y hrs, or n1-n2 days, or 1 week,... (not including subsequent review time)
BattleTable
Based on past exams, the main things you need to know (in rough order of importance) are:
- fact A...
- fact B...
reference part (a) part (b) part (c) part (d) E (2018.Spring #1) E (2018.Spring #1) E (2018.Spring #1) E (2018.Spring #1) E (2018.Spring #1) E (2018.Spring #1) E (2018.Spring #1) E (2018.Spring #1)
In Plain English!
When modelling an insurance contract you need to know who pays and how much they pay out. Risk sharing at an aggregate level makes it challenging to determine overall coverage responsibilities. A familiar example (to US students at least) of aggregate loss cost coverage is health insurance. An insured has a deductible, a co-payment (another type of deductible), and a maximum annual out of pocket amount (the aggregate limit for your deductible and co-pay).
Let's look at the following example from the text. Suppose we have a Commercial General Liability large deductible policy with a per-occurrence deductible of $100,000 and an aggregate limit on the deductible of $500,000. The claim payment pattern for this policy may look like:
| Date | Dollars of loss on claims that are each less than $100k | Number of claims over $100k | Dollars of loss on claims over $100k | Deductible | Insurance payment | Insured's cost so far this year |
| Q1 | $132,500 | 0 | 0 | $132,500 | 0 | $132,500 |
| Q2 | $93,000 | 2 | $350,000 | $293,000 | $150,000 | $425,500 |
| Q3 | $105,000 | 0 | 0 | $74,500 | $30,500 | $500,000 |
| Q4 | $122,500 | 1 | $150,000 | 0 | $272,500 | $500,000 |