Judge whether an unpaid claim estimate is adequate and reasonable by examining the loss ratios, severities, frequencies, and pure premiums it implies.
Free CAS Exam 5 (Basic Ratemaking and Reserving) lesson in Estimating Claim Liabilities. 16 min read, ~2,444 words.
Reasonableness testing means converting your unpaid estimate into implied ultimate metrics, then checking they form an explainable pattern across accident years. Five diagnostics: implied loss ratio, implied pure premium, implied frequency, implied severity, and average unpaid per open-plus-IBNR claim. Pure premium equals frequency times severity; loss ratio equals pure premium...
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What this lesson covers
- Content
- Example 1
- Example 2
- Example 3
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- B16
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