Mahler 2 - Retro Rating 1997 ELFs Flashcards Preview

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Flashcards in Mahler 2 - Retro Rating 1997 ELFs Deck (5):
1

Two phenomena that would affect excess ratios that are not being considered

1. loss development may be different for different sizes of loss


2. there is a "dispersion" effect
Assume we have two claims of $1 million each tat are expected on average to develop by 10%. It makes a difference whether we'll have two claims each at $1.1M, or one claim at $1M, and one claim at $1.2M. The ratio excess of $1.1M will differ in two cases.

2

Impact of simple Dispersion

Raises excess ratio higher limits, alter for lower limits

Higher CV, larger the impact on the excess ratio

 

3

Impact of Gamma dispersion

1. particular significant impact on very high limits, esp if variance is large

2. allows extreme values with small probability

4

Gamma(s,l) loss divisor applied to expo(lemda) loss distribution

Result is Pareto (s, l/lemda)

5

Gamma loss divisor applied to pareto losses

As shape parameter of Pareto (alpha) gets smalls => loss has heavier tail and impact of dispersion increase

 

As CV of gamma increase, impact of dispersion increase