Difference between revisions of "Friedland08.ExpectedClms"
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ECR is a projection, or an ''expectation'' of what the loss ratio or claims ratio is going to be in a future period. Let's start with a very simple example of the ECR method. Suppose you're given: | ECR is a projection, or an ''expectation'' of what the loss ratio or claims ratio is going to be in a future period. Let's start with a very simple example of the ECR method. Suppose you're given: | ||
| − | : '''ECR''' = 75% | + | : '''ECR''' = 75% ''(based on historical CRs varying fairly uniformly between 70% and 80%)'' |
: '''EP''' = 1,000 | : '''EP''' = 1,000 | ||
Revision as of 20:23, 24 April 2020
Contents
Pop Quiz
Study Tips
BattleTable
Based on past exams, the main things you need to know (in rough order of importance) are:
- fact A...
- fact B...
reference part (a) part (b) part (c) part (d) E (2016.Spring #16) unpaid claims:
- expected claims methodFriedland07.Development Friedland09.BornFerg E (2015.Fall #17) Friedland07.Development ultimate claims:
- expected claims methodE (2015.Spring #18) E (2014.Fall #15) E (2014.Spring #19)
In Plain English!
Example A: Very Easy
Recall that LR normally stands for Loss Ratio, and that this is the same things as CR or Claims Ratio. Let ECR stand for Expected Claims Ratio
ECR is a projection, or an expectation of what the loss ratio or claims ratio is going to be in a future period. Let's start with a very simple example of the ECR method. Suppose you're given:
- ECR = 75% (based on historical CRs varying fairly uniformly between 70% and 80%)
- EP = 1,000
Then by the ECR method:
- ultimate claims = ECR x EP = 75% x 1,000 = 750
To say this in words, if you think the ultimate claims ratio for a particular year is going to be 75%, and you also know the EP is 1,000, then the ultimate claims (in dollars) is obviously just the product of ECR and EP.
