Fall 2014 22 b
based on answer, it says 'The actuary’s point estimate is 750 and the top of the range is 1000'.
but it is 800 in the table. I'm confused.. what am I missing here?it says value of the materiality standards is 100.
is it from 10% of high end of actuary's range of unpaid loss and LAE
= 1000*0.1?
Thanks
Comments
There is a typo in the examiner's report - you're correct that the actuary's point estimate should be 800 as noted in the table.
The materiality standard of 100 given in the examiner's report is solely one example given - as long as you can justify something reasonable, I think you would be given full points for range of different materiality standards. Some common standards might be 10% of reserves, 20% of surplus, etc. Maybe the 100 in their example came from 25% of surplus? We'll never know!
Really, the goal of part b is to evaluate whether or not there is RMAD. You would do that by taking the actuary's point estimate + materiality standard (whatever you chose it to be). If that amount is greater than the high end of the range, there is not RMAD. If that amount is less than the high end of the range, there is RMAD.