2018.Fall.#14
Why is net unpaid losses = net reported losses + net ibnr here?
I would think net unpaid losses = ultimate losses - net paid losses = net reported losses + net ibnr - net paid losses = 54350-17350= 37,000
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Why is net unpaid losses = net reported losses + net ibnr here?
I would think net unpaid losses = ultimate losses - net paid losses = net reported losses + net ibnr - net paid losses = 54350-17350= 37,000
Comments
Well, it's a bit tricky with the U&IE (Underwriting & Investment Exhibit.) If you're studying the Odomirok chapters in the order in the Ranking Table then you wouldn't have gotten to Chapter 18 on the U&IE. This problem uses a little bit of material from that chapter.
Your question makes perfect sense but Part 2A in the U&IE (see below for further explanation) shows only unpaid losses even though the column label says "Reported Losses". In other words, the given reported losses are really only the case reserves.
Here's a link to the relevant section in the wiki:
If you go there then click on the link to "U&IE Part 2", scroll to the second page showing Part 2A (which is what's given in this exam problem) and look at the formula and calculation for unpaid losses in column (8), you'll see that it matches the examiner's report solution.
(And if you scroll down further in the examiner's report solution for this question, you'll see that what you did is listed as a common mistake.)
Thank you!