Mahler 2 - Retro Rating 1997 ELFs Flashcards Preview

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

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.


Impact of simple Dispersion

Raises excess ratio higher limits, alter for lower limits

Higher CV, larger the impact on the excess ratio



Impact of Gamma dispersion

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

2. allows extreme values with small probability


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

Result is Pareto (s, l/lemda)


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