Lee1 - The math of XOL coverages & retro rating 1: Exp. Rating Flashcards Preview

CAS Exam 8B > Lee1 - The math of XOL coverages & retro rating 1: Exp. Rating > Flashcards

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1
Q

Advantages and disadvantages of layer method

A

Advantages:

  1. when distribution is given numerically, G(x) usually does not pose a problem
  2. Retro rating table M & L are constructed by layer method

Disadvantage:
G(x) is generally more difficult to integrate

2
Q

Explain why ILFs must increase at a decreasing rate.

A

Divide loss into layers of equal width. Expected payment in any layer is less than the expected payment in the previous layer. Loss must penetrate a lower limit before reaching a upper limit.