Directed at All10 as they have an account here but if someone else has the answer then great. I'm using the 2013 version of the All10 manual but the questions are probably recycled.
The question asks to use the expected claims method to estimate IBNR for AY 2011. The solution considers all years except for AY2011 and in the examiner's comments it says why people were wrong but no justification for why the correct answer is in fact correct (probably why: BECAUSE WE'RE THE EXAM COMMITTEE, B***H). Beautiful. When AY 2011 expected claim ratio was not included my first guess was because it was highly leveraged (as it was the most recent year of claims). They state that some people excluded it for the wrong reasons, "leveraged" being one of the examples. Now if I go to an example in the source material, Friedland pg 134, she clearly states that since the CDFs are highly leveraged then we don't include the experience of the most recent years. I know questions differ but these two examples are similar. Feels like there are a lot of inconsistencies between the source material (which doesn't have any questions to prepare you for the exam. Hooray for capitalism.).
So my question is, if we didn't exclude the most recent year from producing the expected claims ratio because it's highly leveraged, then why did we do it?
The question asks to use the expected claims method to estimate IBNR for AY 2011. The solution considers all years except for AY2011 and in the examiner's comments it says why people were wrong but no justification for why the correct answer is in fact correct (probably why: BECAUSE WE'RE THE EXAM COMMITTEE, B***H). Beautiful. When AY 2011 expected claim ratio was not included my first guess was because it was highly leveraged (as it was the most recent year of claims). They state that some people excluded it for the wrong reasons, "leveraged" being one of the examples. Now if I go to an example in the source material, Friedland pg 134, she clearly states that since the CDFs are highly leveraged then we don't include the experience of the most recent years. I know questions differ but these two examples are similar. Feels like there are a lot of inconsistencies between the source material (which doesn't have any questions to prepare you for the exam. Hooray for capitalism.).
So my question is, if we didn't exclude the most recent year from producing the expected claims ratio because it's highly leveraged, then why did we do it?
All10 Reserving Expected Claims Chapter 8 Question 2012-21
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