IAI Actuarial Core Principles · Economic Modelling · Run-off triangles
A cumulative paid triangle has accident year 2022 with cumulative paid of Rs 400 lakh, Rs 700 lakh and Rs 840 lakh at development years 0, 1 and 2. Accident year 2023 has Rs 500 lakh and Rs 880 lakh at development years 0 and 1. What is the incremental payment for accident year 2022 in development year 1, and the development factor from year 0 to year 1 for 2023?
The incremental payment is Rs 300 lakh, found as cumulative 700 minus cumulative 400 for accident year 2022. The 2023 development factor from year 0 to 1 is 880 divided by 500, which equals 1.76. Other options confuse cumulative with incremental or use the wrong year's factor.
- ARs 300 lakh; 1.76Correct
- BRs 700 lakh; 1.76
- CRs 300 lakh; 1.75
- DRs 140 lakh; 1.76
- Rs 380 lakh; 1.57
Explanation
Incremental in development year 1 for 2022 = 700 - 400 = 300. The 2023 individual factor = 880/500 = 1.76. Using 700 is the cumulative figure, and 1.75 is the 2022 factor (700/400), not 2023's.
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