Weight an indication for credibility and defend both the method chosen and the complement of credibility it leans on.

Free CAS Exam 5 (Basic Ratemaking and Reserving) lesson in Ratemaking. 23 min read, ~3,417 words.

Credibility-weighted estimate = Z × observation + (1 − Z) × complement, with Z between 0 and 1. A credibility measure must be bounded in [0, 1], increase with the size of the risk, and increase at a decreasing rate. The classical claims standard for full credibility is (z /...