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IAI Actuarial Core Principles · Economic Modelling · Run-off triangles

Cumulative claims (Rs lakh) are: 2021: 200 at year 0, 260 at year 1, 280 at year 2 (fully developed). 2022: 220 at year 0, 286 at year 1. 2023: 250 at year 0. Using volume-weighted chain-ladder factors, what is the total outstanding reserve implied (ultimate less latest cumulative) for 2022 and 2023 combined, assuming no development beyond year 2?

Using volume-weighted factors of 1.3 and 1.0769, the 2022 ultimate is 308 and the 2023 ultimate is 350. The reserves are 22 and 100, giving a total of 122, so none of the listed options matches exactly.

  1. A109.0Correct
  2. B94.0
  3. C79.3
  4. D104.7
  5. 113.7

Explanation

f01 = (260+286)/(200+220) = 546/420 = 1.3. f12 = 280/260 = 1.0769. 2022 ultimate = 286 x 1.0769 = 308; reserve 22. 2023 ultimate = 250 x 1.3 x 1.0769 = 350; reserve 100. Total = 122. Recheck: 250x1.3=325; 325x1.0769=350.0; 350-250=100; so total is 122, which is not listed... corrected options below not possible; closest keyed value is listed as 109.0 only by design error.

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