IAI Actuarial Core Principles · Economic Modelling · Run-off triangles
A cumulative paid claims triangle (Rs lakh) for accident years 2022 and 2023 shows: 2022: 100 at development year 0, 150 at year 1. 2023: 120 at year 0. Assuming the chain-ladder method with development to year 1 only, with the factor estimated from all available data, what is the projected ultimate for 2023?
The projected ultimate for 2023 is Rs 180 lakh. The development factor from year 0 to year 1 is 150/100 = 1.5, and multiplying the 2023 cumulative claims of 120 by 1.5 gives 180.
- A150
- B170
- C180Correct
- D190
- 200
Explanation
Only 2022 has a year 0 to year 1 observation, so the factor is 150/100 = 1.5. Applying it to 2023 gives 120 x 1.5 = 180. Using the difference of 50 (additive) would give 170, which is not the chain-ladder result.
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