I spelled complement as compliment in the thread title. Too late now.
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When doing a rate indication that uses as a complement of credibility the target loss & LAE ratio from the last rate review, and the filed rate change ended up differing from the proposed rate change, apparently before using the target as a complement, you have to adjust it as follows (and trend it t00 but who cares about trending):
(Target L&LAE ratio from previous rate review) x (1 + filed rate change / 1+ approved rate change).
Can someone mathematically show or really REALLY logically and exactly explain how this makes perfect sense. I don't understand this really.
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When doing a rate indication that uses as a complement of credibility the target loss & LAE ratio from the last rate review, and the filed rate change ended up differing from the proposed rate change, apparently before using the target as a complement, you have to adjust it as follows (and trend it t00 but who cares about trending):
(Target L&LAE ratio from previous rate review) x (1 + filed rate change / 1+ approved rate change).
Can someone mathematically show or really REALLY logically and exactly explain how this makes perfect sense. I don't understand this really.
Rate Indication where the compliment is the target ratio from previous rate review
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