2. Apply the loss development factors and determine the estimated ultimate losses. Name: Corporate Risk Management RM 301 Forecasting Exercise - Using Loss Development Year Months Total Incurred Losses Loss Development Factor Estimated Ultimate Incurred Losses Assume the following products liability losses for Hawk Manufacturing Company. Accident Year 18 30 42 54 66 2014 2015 2016 2017 2018 66 54 42 30 18 2014 $30,000 $43,000 $58,000 $75,000 $83,700 2015 $43,600 $54,500 $69.800 $87,000 2016 $56,400 $78,300 $99,500 2017 $75.600 $105,800 Losses 2018 $130,000 3. Due to inflationary expectations, the cost to settle these claims is expected to increase by 3% each year. Apply the following trend factors each year to the loss data. Record your answers in the table below Estimated Trend Ultimate Adjusted Total Factor X Incurred Losses 2014 1.16 2015 1.13 2016 1.09 2017 1.06 2018 1.03 1. Given the loss information, calculate (a) the period to period loss development factors and (b) the factors that will be used to estimate ultimate losses. (Use two decimal places, rounding up where appropriate). What do you observe about the loss development factors? a) Period to Period Loss Development Factors Accident Year Months from the beginning of the accident year 18-30 31-42 43-54 4. If total adjusted sales are as follows, calculate the loss per $1,000 of sales. Interpret and evaluate your findings. Adjusted Adjusted Loss per Losses ($) Sales ($000) $1,000 of sales 55 - 66 2014 2015 2014 2015 2016 2017 2018 $55,000 $64,300 $73,460 $81,235 $98,786 2016 Average: 2017 Average: b) Factors to be used to estimate ultimate losses 54 months to ultimate 42 months to ultimate 30 months to ultimate 18 months to ultimate Observation: 2. Apply the loss development factors and determine the estimated ultimate losses. Name: Corporate Risk Management RM 301 Forecasting Exercise - Using Loss Development Year Months Total Incurred Losses Loss Development Factor Estimated Ultimate Incurred Losses Assume the following products liability losses for Hawk Manufacturing Company. Accident Year 18 30 42 54 66 2014 2015 2016 2017 2018 66 54 42 30 18 2014 $30,000 $43,000 $58,000 $75,000 $83,700 2015 $43,600 $54,500 $69.800 $87,000 2016 $56,400 $78,300 $99,500 2017 $75.600 $105,800 Losses 2018 $130,000 3. Due to inflationary expectations, the cost to settle these claims is expected to increase by 3% each year. Apply the following trend factors each year to the loss data. Record your answers in the table below Estimated Trend Ultimate Adjusted Total Factor X Incurred Losses 2014 1.16 2015 1.13 2016 1.09 2017 1.06 2018 1.03 1. Given the loss information, calculate (a) the period to period loss development factors and (b) the factors that will be used to estimate ultimate losses. (Use two decimal places, rounding up where appropriate). What do you observe about the loss development factors? a) Period to Period Loss Development Factors Accident Year Months from the beginning of the accident year 18-30 31-42 43-54 4. If total adjusted sales are as follows, calculate the loss per $1,000 of sales. Interpret and evaluate your findings. Adjusted Adjusted Loss per Losses ($) Sales ($000) $1,000 of sales 55 - 66 2014 2015 2014 2015 2016 2017 2018 $55,000 $64,300 $73,460 $81,235 $98,786 2016 Average: 2017 Average: b) Factors to be used to estimate ultimate losses 54 months to ultimate 42 months to ultimate 30 months to ultimate 18 months to ultimate Observation