AIAF 114- Chapter 5 Practice Exam | Actual Exam Questions | 100% Correct Answers | Verified 2024 Version

When accounting for accident-year losses for year 20X6, which one of the following would be included? - A reserve change in 20X7 for a loss that occurred in 20X6 Correct. When accounting for accident-year losses for year 20X6, a reserve change in 20X7 for a loss that occurred in 20X6 would be included. An accident-year method aggregates incurred losses for a given period (such as twelve months) using all incurred losses for insured events that occurred during that period. Any losses that occurred in previous or later periods are not included. The case reserving method that establishes an average amount for all claims that have similar characteristics in terms of the claimant's age, health, and marital status is known as the - Tabular method Both primary insurers and reinsurers must maintain reserves for expected future loss payments. Which one of the following best describes the reserves that a reinsurer must maintain? - Amounts obligated in the future to pay to primary insurers The average method of case reserving is most suitable for those types of insurance where claims are - Reported and paid promptly Assume an actuary estimates losses at 80 percent of earned premium of $20 million, and that $3 million in losses have been paid. The insurer wants to establish a bulk reserve for reported losses—payment uncertain. Which one of the following represents the appropriate amount for the bulk reserve? - $13 million Correct. Reserves for reported losses when the amount of payment is uncertain can be calculated on a bulk basis by subtracting the amount already paid for losses from a certain percentage of total earned premium. The bulk reserve would be the estimated incurred loss of $16 million ($20 million premium x 80 percent loss ratio) less the $3 million of pai