Question: Forecasting Exercise Using Loss Development Assume the following Workers Compensation losses for MBO Manufacturing Company. Accident Year 18 30 42 54 66 2015 $180,000 $193,000
Forecasting Exercise Using Loss Development
Assume the following Workers Compensation losses for MBO Manufacturing Company.
| Accident Year | 18 | 30 | 42 | 54 | 66 |
| 2015 | $180,000 | $193,000 | $208,000 | $211,000 | $222,700 |
| 2016 | $243,600 | $254,500 | $269,800 | $287,000 |
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| 2017 | $216,400 | $278,300 | $299,500 |
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| 2018 | $275,600 | $305,800 |
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| 2019 | $230,000 |
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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). (c) What do you observe about the loss development factors?
- Period to Period Loss Development Factors
| Accident Year | Months from the beginning of the accident year | |||
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| 18 30 | 31- 42 | 43 54 | 55 66 |
| 2015 |
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| 2016 |
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| 2017 |
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| 2018 |
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| Average |
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b) Factors to be used to estimate Ultimate Losses
| 54 months to ultimate |
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| 42 months to ultimate |
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| 30 months to ultimate |
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| 18 months to ultimate |
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(c) Observation
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