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599 views167 pages

STAM Sample Questions

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Sam Alexander
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© © All Rights Reserved
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SOCIETY OF ACTUARIES EXAM STAM SHORT-TERM ACTUARIAL MATHEMATICS EXAM STAM SAMPLE QUESTIONS Questions 1-307 have been taken from the previous set of Exam C sample questions. Questions no longer relevant to the syllabus have been deleted. Questions 308-326 are based on material newly added. April 2018 update: Question 303 has been deleted. Corrections were made to several of the new questions, 308-326, December 2018 update: Corrections were made to questions 322, 323, and 325. Questions 327 and 328 were added. Some of the questions in this study note are taken from past examinations. The weight of topics in these sample questions is not representative of the weight of topics on the exam, ‘The syllabus indicates the exam weights by topic. Copyright 2018 by the Society of Actuaries PRINTED IN U.S.A. STAM-09-18 -1- 1. DELETED You ate given: (i) The number of claims has a Poisson distribution (ii) Claim sizes have a Pareto distribution with parameters @=0.5 and a =6 (iii) ‘The number of claims and claim sizes are independent. (iv) ‘The observed pure premium should be within 2% of the expected pure premium 90% of the time, Calculate the expected number of claims needed for full credibility. (A) Less than 7,000 (B) Atleast 7,000, but less than 10,000 (C) Atleast 10,000, but less than 13,000 (D) Atleast 13,000, but less than 16,000 (E) Atleast 16,000 3. DELETED STAM-09-18 -2- You are given: @ Le 's follow a single-parameter Pareto distribution with density function: fay--, xo, O1 Calculate Biihlmann’s k for aggregate losses. (A) Less than 1 (B) Atleast 1, but less than 2 (C) Atleast 2, but less than 3 (D) Atleast 3, but less than 4 (BE) Atleast4 10. DELETED STAM-09-18 -4- 11. 12. You are given: () Losses on a company’s insurance policies follow a Pareto distribution with probability density function: 8 f(x|A)= Os00. ‘Two claims, x, =400 and x,600, are observed. You calculate the posterior distribution as: 600" ) =|, @> 600 a) FAs) Calculate the Bayesian premium, E(X, |.) (A) 450 (B) 500 © 350 (D) 600 (E) 650 46. DELETED STAM-09-18 -24- 47. Youare given the following observed claim frequency data collected over a period of 365 days: ‘Number of Claims per Day Observed Number of Days 0 50 1 122 2 101 3 92 4 0 Fit a Poisson distribution to the above data, using the method of maximum likelihood. Regroup the data, by number of claims per day, into four groups: o 1 20 3 Apply the chi-square goodness-of fit test to evaluate the null hypothesis that the claims follow a Poisson distribution. Determine the result of the chi-square test. (A) (B) © (D) ®) Reject at the 0.005 significance level. Reject at the 0.010 significance level, but not at the 0.005 level. Reject at the 0.025 significance level, but not at the 0.010 level. Reject at the 0.050 significance level, but not at the 0.025 level. Do not reject at the 0.050 significance level STAM-09-18 -25- 48. Youare given the following joint distribution: Fora given value of @ and a sample of size 10 for X: @ x 0 1 0 04 On 1 o1 02 2 O41 O1 Calculate the Biihlmann credibility premium. (A) (B) © () ®) STAM-09-18 0.75 0.79 0.82 0.86 0.89 -26- 49. DELETED 50. You are given four classes of insureds, cach of whom may have zcro or onc claim, with the following probabilities: Class ‘Number of Claims 0 1 L 0.9 1 ul 0.8 0.2 ur 05 05 Vv Ol 09 A cclass is selected at random (with probability 0.25), and four insureds are selected at random from the class. The total number of claims is two. If five insureds are selected at random from the same class, estimate the total number of claims using Bihlmann-Straub credibility. (A) 2.0 (B) 22 () 24 (D) 26 (E) 28 51. DELETED 52. DELETED STAM-09-18 -27- 53. Youare given: Number of Claims _| Probability | Claim Size_| Probability 0 us 1 3/5 25 3 150 23 2 5 50 2B 200 3 Claim sizes are independent. Calculate the variance of the aggregate loss. “ 8) © (@) ® 4,050 8,100 10,500 12,510 15,612 54, DELETED STAM-09-18 -28- 55. Youare given: Class] Number of Claim Count Probabilities Insureds 0 1 2 3 4 1 3000 18 18 13 0 0 2 2000 0 28 6 0 3 1000 0 0 1/6 28 16 A randomly selected insured has one claim in Year 1. Calculate the Bayesian expected number of claims in Year 2 for that insured, (A) (B) © () (©) 1.00 1.67 175 STAM-09-18 -29- 56. Youare given the following information about a group of policies: Claim Payment Policy Limit 5 50 15 50 60 100 100 100 500 500 500 1000 Determine the likelihood function, (A) (B) © (@) ©) F(50) f (50) f (100) F100) f (500) F 1000) £450) £50) F100) / (100) /(500) /(1000) /[1— F1000)] F(S)F(05),f(60) f 100) f (500) f (500) £ (5) f(15) f (60) f (100) f (S00) f(1000) / [1 — F(1000)} LFS) 60) F100) [1 — F(S00)Lf (S00) STAM-09-18 -30- 57. DELETED 58. Youare given: @ (ii (iii) ‘The number of claims per auto insured follows a Poisson distribution with mean 2 ‘The prior distribution for 2 has the following probability density function: [0TH ‘A company observes the following claims experience: _ (500A) te" Year 1 Year 2 Number of claims 75, 210 Number of autos insured 600 900 ‘The company expects to insure 1100 autos in Year 3. Calculate the Bayesian expected number of claims in Year 3. (A) 6) © (Dy ©) 178 184 193 209 224 STAM-09-18 59. The graph below shows a p-p plot of a fitted distribution compared to a sample. Fitted Sample Which of the following is true? (A) The tails of the fitted distribution are too thick on the left and on the right, and the fitted distribution has less probability around the median than the sample. (B) The tails of the fitted distribution are too thick on the left and on the right, and the fitted distribution has more probability around the median than the sample. (C) The tails of the fitted distribution are too thin on the left and on the right, and the fitted distribution has less probability around the median than the sample. (D) The tails of the fitted distribution are too thin on the left and on the right, and the fitted distribution has more probability around the median than the sample. (E) The tail of the fitted distribution is too thick on the left, too thin on the right, and the fitted distribution has less probability around the median than the sample. STAM-09-18 -32- 60. 61. You are given the following information about six coins: Cor Probability of Heads 1-4 0.50 5 0.25 6 0.75 A coin is selected at random and then flipped repeatedly. X, denotes the outcome of the ith ‘lip, where “1” indicates heads and “0” indicates tails. The following sequence is obtained: S={X,X,,X,,X,} = {11,01} Calculate E(X, |S) using Bayesian analysis. (A) 052 (B) 0.54 © 0.56 (D) 0.59 (©) 0.63 ‘You observe the following five ground-up claims from a data set that is truncated from below at 100: 125° 150 165 175-250 You fit a ground-up exponential distribution using maximum likelihood estimation, Calculate the mean of the fitted distribution. “a 3B (B) 100 (©) 128 (D) 156 © 13 STAM-09-18 - 62. An insurer writes a large book of home warranty policies. You are given the following information regarding claims filed by insureds against these policies: ()) A maximum of one claim may be filed per year. (ii) The probability of a claim varies by insured, and the claims experience for each insured is independent of every other insured, ii) The probability of a claim for each insured remains constant over time, (iv) The overall probability of a claim being filed by a randomly selected insured in a year is 0.10. (v) The variance of the individual insured claim probabilities is 0.01 An insured selected at random is found to have filed 0 claims over the past 10 years. Calculate the Bithlmann credibility estimate for the expected number of claims the selected insured will file over the next 5 years. (A) 0.04 B) 0.08 (C) 0.17 (D) 0.22 (E) 0.25 63. DELETED STAM-09-18 -34- 64. For a group of insureds, you are given: ()) The amount of a claim is uniformly distributed but will not exceed a certain unknown limit 6. 500 (ii) The prior distribution of @ is (0) ==, @>500 (iii) Two independent claims of 400 and 600 are observed. Calculate the probability that the next claim will exceed 550. (A) 0.19 (B) 0.22 (© 0.25 (D) 0.28 © 031 STAM-09-18 -35- 65. You are given the following information about a general liability book of business comprised of 2500 insureds: @ di) (i) a) X,=2Y, isa random variable representing the annual loss of the ith insured. N,,Nyy.++sNogqp ate independent and identically distributed random variables following a negative binomial distribution with parameters r= 2 and f =0.2 Ya Yareosds a Pareto distribution with a =3.0 and are independent and identically distributed random variables following =1000 ‘The full credibility standard is to be within 5% of the expected aggregate losses 90% of the time. Using limited fluctuation credibility theory, calculate the partial credibility of the annual loss experience for this book of business. (A) ®) © @) ©) 0.34 0.42 0.47 0.50 STAM-09-18 -36- 66. DELETED 67. You are given the following information about a book of business comprised of 100 insureds ()—_-X,=)LY, is a random variable representing the annual loss of the ith insured. (ii) —N,,Nj,-+-,Niq are independent random variables distributed according to a negative binomial distribution with parameters x (unknown) and f = 0.2 (ii) The unknown parameter r has an exponential distribution with mean 2. (iv) ¥j,¥gs04s¥y, are independent random variables distributed according to a Pareto distribution with @ =3.0 and 0 =1000. Calculate the Bidhlmann credibility factor, Z, for the book of business. (A) 0.000 (B) 0.045 (©) 0.500 (D) 0.826 (BE) 0.905 STAM-09-18 -37- 69. 70. You fit an exponential distribution to the following data: 1000 1400S 530074007600 Calculate the coefficient of variation of the maximum likelihood estimate of the mean, 8. (A) 033 (B) 045 © 0.70 (D) 1.00 © 121 You are given the following information on claim frequency of automobile accidents for individual drivers: Business Use Pleasure Use Expected Claim “Expected Claim Claims Variance Claims Variance Rural 1.0 05 15 0.8 Urban 2.0 10 25 1.0 Total 18 1.06 23 112 You are also given: (i) Each driver’s claims experience is independent of every other driver's. (ii) There are an equal number of business and pleasure use drivers. Calculate the Biihlmann credibility factor for a single driver. (A) 0.05 (B) 0.09 (© 017 (D) 0.19 ® 027 STAM-09-18 -38- 71. You are investigating insurance fraud that manifests itself through claimants who file claims with respect to auto accidents with which they were not involved. Your evidence consists of a distribution of the observed number of claimants per accident and a standard distribution for accidents on which fraud is known to be absent. The two distributions are summarized below: Number of Claimants Standard Probability Ober ed Number of 0.25 235 0.35 335 0.24 250 OL ML 0.04 47 0.01 22 1.00 1000 Determine the result of a chi-square test of the null hypothesis that there is no fraud in the observed accidents, (A) Reject at the 0.005 significance level. (B) Reject at the 0.010 significance level, but not at the 0.005 level. (C) Reject at the 0.025 significance level, but not at the 0.010 level (D) Reject at the 0.050 significance level, but not at the 0.025 level. {E) Do not reject at the 0.050 significance level STAM-09-18 -39- 72. Youre given the following data on large business policyholders: @ (i) Gi) (w) i) Losses for each employee of a given policyholder are independent and have a common mean and variance. The overall average loss per employee for all policyholders is 20. The variance of the hypothetical means is 40. The expected value of the process variance is 8000. ‘The following experience is observed for a randomly selected policyholder: Year ‘Average Loss per Number of Employee Employees 1 15, 800 2 10 600 3 5 400 Calculate the Bihlmann-Straub credibility premium per employee for this policyholder. CN} (B) (©) @) (E) Less than 10.5 At least 10,5, but less than 11.5 At least 11.5, but less than 12.5 Atleast 12.5, but less than 13.5 At least 13.5 73. DELETED 74, DELETED 75. DELETED STAM-09-18 -40- 76. Youare given: ()) The annual number of claims for each policyholder follows a Poisson distribution with mean 8. Gi) The distribution of @ across all policyholders has probability density function: f(0)=0e", 0>0 1 (iii) Pee"do- A randomly selected policyholder is known to have had at least one claim last year. Calculate the posterior probability that this same policyholder will have at least one claim this year. (A) 0.70 (B) 0.75 (© 0.78 (D) 081 (©) 0.86 77. DELETED STAM-09-18 -41- 78. Youare given: () Claim size, X, has mean 4 and variance $00. (ii) The random variable 41 has a mean of 1000 and variance of 50. ii) The following three claims were observed: 750, 1075, 2000 Calculate the expected size of the next claim using Bithlmann credibility, (A) 1025 (B) 1063 © 1s (D) 1181 (E) 1266 STAM-09-18 -42- 79. 80. 81. 82. 83. Losses come from a mixture of an exponential distribution with mean 100 with probability p and an exponential distribution with mean 10,000 with probability 1 -p. Losses of 100 and 2000 are observed. Determine the likelihood function of p. Pie 10,000} a (. \ ww [een ao} (100 10,000 )"{ 100” 10,000} © (22 a pe) pe pew?) (100 "~ 10,000 100" 10,000} wo (ae, dae) (cane) (100 "10,000 }"\ 100" 10,000} oat) few gat) ® | at -P) o*aa0n | 100 "10,000 } {100 10,000 } DELETED DELETED DELETED DELETED STAM-09-18 -43- 84. A health plan implements an incentive to physicians to control hospitalization under which the physicians will be paid a bonus B equal to c times the amount by which total hospital claims are under 400 (0 < ¢ <1) The effect the incentive plan will have on underlying hospital claims is modeled by assuming that the new total hospital claims will follow a two-parameter Pareto distribution with @ =2 and 0 =300 E(B) =100 Caleulate (A) 0.44 (B) 0.48 (© 0.52 (D) 0.56 ©) 0.60 STAM-09-18 -44- 85. Computer maintenance costs for a department are modeled as follows: (i) The distribution of the number of maintenance calls each machine will need in a year is Poisson with mean 3. (ii) The cost for a maintenance call has mean 80 and standard deviation 200, (ii) The number of maintenance calls and the costs of the maintenance calls are all, ‘mutually independent. The department must buy a maintenance contract to cover repairs if there is at least a 10% probability that aggregate maintenance costs in a given year will exceed 120% of the expected costs. Using the normal approximation for the distribution of the aggregate maintenance co: calculate the minimum number of computers needed to avoid purchasing a maintenance contract. (A) 80. (B) 90 (© 100 @) 110 ® 120 STAM-09-18 -45- 86. Agategate losses for a portfolio of policies are modeled as follows: (i) The number of losses before any coverage modifications follows a Poisson distribution with mean A (ii) The severity of each loss before any coverage modifications is uniformly distributed between 0 and b The insurer would like to model the effect of imposing an ordinary deductible, d (0 -l Calculate the maximum likelihood estimate of p. (A) 40 ®) 41 © 42 ) 43 (©) 44 STAM-09-18 -71- 138. DELETED 139. Members of three classes of insureds can have 0, 1 or 2 claims, with the following probabilities: Number of Claims Class 0 1 2 I 0.9 0.0 Ol 1 0.8 01 Ol ii 07 0.2 ol A class is chosen at random, and varying numbers of insureds from that class are observed over 2 years, as shown below: Year Number of Insureds Number of Claims 1 20 7 2 30 10 Calculate the Bihlmann-Straub credibility estimate of the number of claims in Year 3 for 35 insureds from the same class. (A) 106 (B) 109 © 1a () 114 ® 16 STAM-09-18 -72- 140. You are given the following random sample of 30 auto claims: 54 140-230 560, 600 1,100 1,500 1,800 1,920 2,000 2,450 2,500 2,580 2,910 3,800 3,800 3,810 3,870 4,000 4,800 7,200 7,390 11,750 12,000 15,000 25,000 30,000 32,300 35,000 55,000 You test the hypothesis that auto claims follow a continuous distribution F(x) with the following percentiles: x 310-500 2,498 4,876 7,498——_—12,930. FQ) 016 027 0.55 O81 0.90 0.95 You group the data using the largest number of groups such that the expected number of claims in each group is at least 5 Calculate the chi-square goodness-of-fit statistic (A) Less than 7 (B) Atleast 7, but less than 10 (©) Atleast 10, but less than 13 (D) Atleast 13, but less than 16 (BE) Atleast 16 141. DELETED STAM-09-18 -T3- 142. You are given: (i) The number of claims observed in a 1-year period has a Poisson distribution with mean @) (ii) ‘The prior density is: (0) 0<0 100]=3 FLX 50] X > 50] Caleulate ELX-150| X > 150]. (A) 150 (B) 175 {C) 200 (D) 225 (E) 250 STAM-09-18 -83- 163. The scores on the final exam in Ms. B’s Latin class have a normal distribution with mean and standard deviation equal to 8. is a random variable with a normal distribution with mean 75 and standard deviation 6. s the student | times the student's ), then there is no payment. Each year, Ms. B chooses a student at random and pay score, However, if the student fails the exam (score < Calculate the conditional probability that the payment is less than 90, given that there is a payment. (A) 0.77 (B) 0.85 (©) 0.88 () 0.92 1.00 STAM-09-18 -84- 164. For a collective risk model the number of losses, N, has a Poisson distribution with 2.=20 ‘The common distribution of the individual losses has the following characteristics: (i) LX] =70 (iil) ELX A30]=25 (iii) Pr(X > 30)=0.75 (iv) ELX? |X >30]=9000 An insurance covers aggregate losses subject to an ordinary deductible of 30 per loss. Calculate the variance of the aggregate payments of the insurance (A) 54,000 (B) 67,500 (©) 81,000 (DB) 94,500 (B) 108,000 STAM-09-18 -85- 165. For a collective risk model: (i) The number of losses has a Poisson distribution with 2 =2 (ii) The common distribution of the individual losses is: ae) 1 0.6 2 04 An insurance covers aggregate losses subject to a deductible of 3 Calculate the expected aggregate payments of the insurance. (A) 0.74 (B) 0.79 ©) 0.84 (D) 0.89 ®) 0.94 166. A discrete probability distribution has the following properties: 1) @ nad tetlp., for k= 1,2, ok (i) Py =0.5 Calculate c, (A) 0.06 ®) 013 (© 0.29 (D) 0.35 ©) 0.40 STAM-09-18 - 86 - 1677. The repair costs for boats in a marina have the following characteristics: Number of | Probability that | Mean of repair cost | Variance of repair Boat type boats | repair is needed iven arepair__| cost given a repair Power boats 100 03 300 10,000 Sailboats 300 ol 1000 400,000 Tuxury yachts 30 06 3000 2,000,000 At most one repair is required per boat each year. Repair incidence and cost are mutually independent. The marina budgets an amount, ¥, equal to the aggregate mean repair costs plus the standard deviation of the aggregate repair costs Calculate Y. (A) 200,000 (B) 210,000 (©) 220,000 (D) 230,000 (E) 240,000 STAM-09-18 -87- 168. For an insurance: 169. wo (ii) (iii) Li s can be 100, 200 or 300 with respective probabilities 0.2, 0.2, and 0.6. The insurance has an ordinary deductible of 150 per loss. Y* is the claim payment per payment random variable. Calculate Var(¥") (A) (B) © (D) (E) 1500 1875 2250 2625 3000 The distribution of a loss, X, is a two-point mixture: a (ii With probability 0.8, Yhas a two-parameter Pareto distribution with o =2 and 0=100 With probability 0.2, X has a two-parameter Pareto distribution with with a= 4 and 0 =3000. Caleulate Pr.X < 200) (A) (B) © (D) (E) 0.76 0.79 0.82 0.85 0.88 STAM-09-18 -88- 170. Ina certain town the number of common colds an individual will get in a year follows a Poisson distribution that depends on the individual’s age and smoking status. The distribution of the population and the mean number of colds are as follows: Proportion of population | Mean number of colds Children 0.30 3 Adult Non-Smokers 0.60 1 Adult Smokers 0.10 4 Calculate the conditional probability that a person with exactly 3 common colds in a year is an adult smoker. (A) 0.12 (B) 0.16 (C) 0.20 (D) 0.24 (B) 0.28 171. For aggregate losses, S: (i) The number of losses has a negative binomial distribution with mean 3 and variance 3.6. (ii) The common distribution of the independent individual loss amounts is uniform from 00 20. Calculate the 95" percentile of the distribution of S as approximated by the normal distribution. (A) 61 B) 63 © 65 (D) 67 © 69 STAM-09-18 -89- 172. You are given: w ai) (iii) A random sample of five observations fiom a population is: 02°07 09 11 13 You use the Kolmogorov-Smirnoy test for testing the null hypothesis, H,, that the probability density function for the population is: 4 a fe) x>0 Critical values for the Kolmogorov-Smimov test are: Level of Significance [0.10 [0.05 [0.025 | 0.01 Critical Value 122 [136 [148 [1.63 Determine the result of the test. (A) (B) (©) (Dy ) Do not reject H, at the 0.10 significance level. Reject H7, at the 0.10 significance level, but not at the 0.05 significance level. Reject H, at the 0.05 significance level, but not at the 0.025 significance level. Reject H, at the 0.025 significance level, but not at the 0.01 significance level. Reject H, at the 0.01 significance level. STAM-09-18 -90- 173. You are given: w (ii) Gi) The number of claims follows a negative binomial distribution with parameters r and B=3. Claim severity has the following distribution: Claim Size | Probability 1 04 10 04 100 0.2 ‘The number of claims is independent of the severity of claims. Calculate the expected number of claims needed for aggregate losses to be within 10% of expected aggregate losses with 95% probability (A) (B) © (D) ) Less than 1200 At least 1200, but less than 1600 At least 1600, but less than 2000 At least 2000, but less than 2400 At least 2400 STAM-09-18 -91- 174. DELETED 175. DELETED 1.0 0.8 06 04 0.2 0.0 F(x) 00 02 04 06 08 10 Fa(x) The plot is based on the sample: 1 2 3 1S 30, 50 SL 99 100 Determine the fitted model underlying the p-p plot. (A) F(x)=1-x°*, x21 (B) F(x)=x/(+x),x20 (©) Uniform on [1, 100] (D) Exponential with mean 10 (E) Normal with mean 40 and standard deviation 40 STAM-09-18 -92- 177. You are given: (Claims are conditionally independent and identically Poisson distributed with mean e (ii) The prior distribution function of © is: 1 —.} , e>0 +0) / F(@)=1-| v Five claims are observed. Calculate the Bithlmann credibility factor. (A) Less than 0.6 (B) Atleast 0.6, but less than 0.7 (©) Atleast 0.7, but less than 0.8 (D) Atleast 0.8, but less than 0.9 (BE) Atleast 0.9 178. DELETED 179. The time to an accident follows an exponential distribution. A random sample of size two. hhas a mean time of 6. Let ¥ denote the mean of a new sample of size two. Calculate the maximum likelihood estimate of Pr(Y > 10) (A) 0.04 (B) 0.07 (© oll (D) 0.15 ©) 0.19 STAM-09-18 -93- 180. 181. The time to an accident follows an exponential distribution. A random sample of size two. has a sample mean time of 6, Let ¥ denote the mean of a new sample of size two, Calculate the delta method approximation of the variance of the maximum likelihood estimator of F,(10) (A) 0.08 (B) 0.12 © 0.16 (D) 0.19 () 0.22 You are given: (i) The number of claims in a year for a selected risk follows a Poisson distribution with. mean (ii) The severity of claims for the selected risk follows an exponential distribution with mean @ (iii) ‘The number of claims is independent of the severity of claims. (iv) The prior distribution of 2 is exponential with mean 1 (v) The prior distribution of @ is Poisson with mean 1 (vi) A priori, 2 and @ are independent. Using Biihlmann’s credibility for aggregate losses, calculate k (A 1 (B) 43 © 2 @) 3 ® 4 STAM-09-18 -94- 182. DELETED 183. DELETED 184. You are given: (Annual claim frequencies follow a Poisson distribution with mean A (ii) The prior distribution of 2 has probability density function: 1 l 1 2640.6), aro so FOOTE, A> Ten claims are observed for an insured in Year 1 Calculate the Bayesian expected number of claims for the insured in Year 2 (A 96 ®) 97 © 98 ©) 99 ) 10.0 185. DELETED 186. DELETED STAM-09-18 -95- 187. You are given: (i) The annual number of claims on a given policy has a geometric distribution with parameter (ii) The prior distribution of # has the Pareto density function x(B) 0 An insured is selected at random and observed to have x, =5 claims during Year 1 and 2, =3 claims during Year 2 Calculate ELA |x, =5,x, =3] (A) 3.00 (B) 3.25 (© 3.50 (D) 3.75 (©) 4.00 192. DELETED 193. DELETED STAM-09-18 -98- 194, You are given: Year 1 Year 2 Year 3 Total Total Claims 10,000 15,000 | 25,000 Number in Group 30 60 110 Average 200 280 |_227.27 Total Claims 16,000 | 18,000 34,000 Number in Group 100 90 190 Average 160 200 178.95 Total Claims 59,000 Number in Group 300 Average 196.67 You are also given Calculate the nonparametric empirical Bayes credibility factor for Group 1 (a) (B) © (D) ®) 0.48 0.50 0.52 0.54 0.56 195. DELETED STAM-09-18 -99- 196. You are given the following 20 bodily injury losses (before the deductible is applied): Loss Numberof | Deductible | Policy Limit Losses 750 3 200 200 3 0 10,000 300 4 20,000 >10,000 6 10,000 400 4 300 oo Past experience indicates that these losses follow a Pareto distribution with parameters and @= 10,000. Calculate the maximum likelihood estimate of @ (A) Less than 2.0 (B) Atleast 2.0, but less than 3.0 (C) Atleast 3.0, but less than 4.0 (D) Atleast 4.0, but less than 5.0 (BE) Atleast $.0 STAM-09-18 - 100- 197. You are given: (i) During a 2-year period, 100 policies had the following claims experience: Total Claims in| Number of Policies Years 1 and 2 0 50, 1 30 2 15 3 4 4 1 (ii) ‘The number of claims per year follows a Poisson distribution. (iii) Fach policyholder was insured for the entire 2-year period. A randomly selected policyholder had one claim over the 2-year period. Using semiparametric empirical Bayes estimation, calculate the Biihlmann estimate for the number of claims in Year 3 for the same policyholder. (A) 0.380 (B) 0.387 (©) 0.393 (D) 0.403 (©) 0.443 198. DELETED STAM-09-18 -101- 199. 200. Personal auto property damage claims in a certain region are known to follow the Weibull distribution: 130 240 300 540 ‘The values of two additional claims are known to exceed 1000. Calculate the maximum likelihood estimate of 8. (A) Less than 300 (B) Atleast 300, but less than 1200 (©) Atleast 1200, but less than 2100 (D) Atleast 2100, but less than 3000 (E) Atleast 3000 For five types of risks, you are given: (The expected number of claims in a year for these risks ranges from 1.0 to 4.0, (ii) The number of claims follows a Poisson distribution for each risk During Year 1,» claims are observed for a randomly selected risk. For the same risk, both Bayes and Biihlmann credibility estimates of the number of claims in Year 2 are calculated for n = 0,1,2, ... 9. Which graph on the next page represents these estimates? STAM-09-18 - 102- w [4s [as * 40 Bi 40 t— . * . He ~—+—* #35 7 4 $30 =+ 230 2 € @ : 78 Bas 4 Bas 5 20 a 8 20 eI oye Bela Sich co ery je Bininenn| 10 510 a [ABayee zg Bayes os os oo 00 0 2 4 6 8 ww ° 48) 8 No.of Claims in Year 4 No.of Claims in Year 4 © 45 | 45 40 40 fi - a 5 Ta B25 — 4 25 —_ g30 $$ S30 48 Bos * o ges 4 3 20 4—,—= 8 20 2. Sis “ S15 gijh se je Simeon 2) fe Banimenn z } ABavee geta [aBaves 05 os oo 00 o 2 4 8 68 « 0 Pe) No.of Claims in Year 4 No.of Claims in Year 4 45 > © 2 335 eres 2 20 4 Bos i 3 20 2 es Zot 8 [2 Bohimann a [a Bayes Sos[ 0 oo o 2 4 6 6 w STAM-09-18 Ho. of Claims in Year 4 -103- 201. You test the hypothesis that a given set of data comes from a known distribution with distribution function F(x). The following data were collected: Number of Interval Fo) Observations x<2 0.035 5 20 30° “a — n ® 3n? © o + 1 © s STAM-09-18 -119- 230. For a portfolio of independent risks, the number of claims for each risk in a year follows a Poisson distribution with means given in the following table: ‘Mean Number of Class Claims per Risk ‘umber of Risks 1 1 900 2 10 90 3 20 10 ‘You observe x claims in Year | for a randomly selected risk. The Bihlmann credibility estimate of the number of claims for the same risk in Year 2 is 11.983. Calculate x a 13 B) 14 © 15 () 16 © 7 231. DELETED 232. DELETED STAM-09-18 -120- 233. You are given: (A region is comprised of three territories. Claims experience for Year 1 is as follows: Territory | Number of Insureds | Number of Claims A 10 4 B 20 5 c 30. 3 (ii) ‘The number of claims for cach insured each year has a Poisson distribution. (iii) Each insured in a territory has the same expected claim frequency. (iv) ‘The number of insureds is constant over time for each territory. Calculate the Bithimann-Straub empirical Bayes estimate of the credibility factor Z for Territory A. (A) Less than 0.4 (B) Atleast 0.4, but less than 0.5 (C) Atleast 0.5, but less than 0.6 (D) Atleast 0.6, but less than 0.7 (B) Atleast 0.7 234. DELETED STAM-09-18 -121- 235. You are given: wo (ii) (i) (iv) A random sample of losses from a Weibull distribution is: 595 700 789 799 1109 At the maximum likelihood estimates of 9 and 1, YyIn[ f(x,)]=—33.05 When 1 = 2, the maximum likelihood estimate of is 816.7. ‘You use the likelihood ratio test to test the hypothesis Hy:t=2 vs, Hy: #2 Determine the result of the test. (A) (B) (©) (D) ®) Do not reject the null hypotheses at the 0.10 level of significance. Reject the null hypothesis at the 0.10 level of significance, but not at the 0.05 level of significance. Reject the null hypothesis at the 0.05 level of significance, but not at the 0.025 level of significance. Reject the null hypotheses at the 0.025 level of significance, but not at the 0.01 level of significance. Reject the null hypothesis at the 0.01 level of significance. STAM-09-18 -122- 236. For each policyholder, losses X),...,X, , conditional on © , are independently and identically distributed with mean, (0) = ELX,|©=6], j=1,2,....0 and variance, v(0)=VarlX,|0=0], jf You are given: (i) The Bithlmann credibility assigned for estimating X; based on X,,, Z=04. is (ii) The expected value of the process variance is known to be 8. Calculate Cov(X,,X;), 14 jf (A) Less than -0.5 (B) Atleast -0.5, but less than 0. (©) Atleast 0.5, but less than 1.5 (D) Atleast 1.5, but less than 2.5 (EB) Atleast 2.5 237. DELETED 238. DELETED 239. DELETED STAM-09-18 -123- 240. For a group of auto policyholders, you are given: (i) The number of claims for each policyholder has a conditional Poisson distribution. (ii) During Year 1, the following data are observed for 8000 policyholders: Number of Claims _| Number of Policyholders 0 5000 1 2100 2 750 3 100 4 50 St 0 A randomly selected policyholder had one claim in Year 1, Calculate the semiparametric empirical Bayes estimate of the number of claims in Year 2 for the same policyholder. (A) Less than 0.15 (B) Atleast 0.15, but less than 0.30 (C) Atleast 0.30, but less than 0.45 (D) Atleast 0.45, but less than 0.60 (BE) Atleast 0.60 STAM-09-18 -124- 241. You are given: (i) The following are observed claim amounts: 400 1000 1600 3000 5000 5400 6200 (i) An exponential distribution with @ = 3300 is hypothesized for the data. (iii) The goodness of fit is to be assessed by a p-p plot and a D(x) plot. Let (s, t) be the coordinates of the p-p plot for a claim amount of 3000. Calculate (s - ) - D(3000). (A) -0.12 (B) -0.07 © 6.00 () 0.07 ® 012 STAM-09-18 -125- 242. You are given: (Ina portfolio of risks, each policyholder can have at most two claims per year. (ii) For each year, the distribution of the number of claims is: ‘Number of Claims | Probability 0 0.10 1 0.90-4 2 q (iii) The prior density is: 2 q =, 02<4<05 79) = 05° q A randomly selected policyholder had two claims in Year 1 and two claims in Year 2. For this insured, calculate the Bayesian estimate of the expected number of claims in ‘Year 3. (A) Less than 1.30 (B) At least 1.30, but less than 1.40 (C) Atleast 1.40, but less than 1.50 (D) Atleast 1.50, but less than 1.60 (BE) Atleast 1.60 243. DELETED STAM-09-18 -126- 244, which of statements (A), (B), (C), and (D) is false? (A) (B) © () ) The chi-square goodness-of-fit test works best when the expected number of, observations varies widely from interval to interval. For the Kolmogorov-Smimov test, when the parameters of the distribution in the null hypothesis are estimated from the data, the probability of rejecting the null hypothesis decreases. For the Kolmogorov-Smimov test, the critical value for right censored data should be smaller than the critical value for uncensored data, (Removed as this statement referred to the Anderson-Darling test). None of (A), (B), or (C) is false. 245. You are given: @ ic) (iii) (iv) ‘The number of claims follows a Poisson distribution, Claim sizes follow a gamma distribution with parameters @ (unknown) and = 10,000 ‘The number of claims and claim sizes are independent. ‘The full credibility standard has been selected so that actual aggregate losses will be within 10% of expected aggregate losses 95% of the time. Using limited fluctuation (classical) credibility, calculate the expected number of claims required for full credibility. (A) (B) © (D) ®) Less than 400 At least 400, but less than 450 At least 450, but less than 500 At least 500 ‘The value cannot be determined from the information given. 246. DELETED STAM-09-18 -127- 2477. An insurance company sells three types of policies with the following characteristics: Type ofPolicy | Proportion of Total | Annual Claim Frequency Policies I 5% Poisson with mean 0.25 i 20% Poisson with mean 0.50 UL 75% Poisson with mean 1.00 A randomly selected policyholder is observed to have a total of one claim for Year | through Year 4, For the same policyholder, calculate the Bayesian estimate of the expected number of claims in Year 5. “ (B) © (D) ©) Less than 0.4 At least 0.4, but less than 0.5 At least 0.5, but less than 0.6 At least 0.6, but less than 0.7 At least 0.7 248. DELETED 249. DELETED STAM-09-18 - 128 - 250. You have observed the following three loss amounts: 186 91 66 Seven other amounts are known to be less than or equal to 60, Losses follow an inverse exponential with distribution function Faye, x>0 Calculate the maximum likelihood estimate of the population mode. (A) (B) © (D) () Less than 11 Atleast 11, but less than 16 At least 16, but less than 21 At least 21, but less than 26 At least 26 STAM-09-18 -129- 251. Fora group of policies, you are given: wo (ii) (iii) év) ) (vi) The annual loss on an individual policy follows a gamma distribution with parameters @=4 and 6. ‘The prior distribution of # has mean 600. A randomly selected policy had losses of 1400 in Year 1 and 1900 in Year 2, Loss data for Year 3 was misfiled and unavailable. Based on the data in (ii), the Bithlmann credibility estimate of the loss on the selected policy in Year 4 is 1800, After the estimate in (v) was calculated, the data for Year 3 was located. The loss on the selected policy in Year 3 was 2763. Calculate the Bidhlmann credibility estimate of the loss on the selected policy in Year 4 based on the data for Years 1, 2 and 3. (A) (B) © ) () Less than 1850 At least 1850, but less than 1950 At least 1950, but less than 2050 At least 2050, but less than 2150 Atleast 2150 252. DELETED STAM-09-18 -130- 253. You are given: () For Q=q, X,,Xz,-..,X,, are independent, identically distributed Bernoulli random variables with parameter q. i) S,aX+X,te-4X, (ii) The prior distribution of Q is beta with a=1, b=99, and @=1 Calculate the smallest value of m such that the mean of the marginal distribution of 5, is greater than or equal to 50. (A) 1082 (B) 2164 (©) 3246 (D) 4950 (F) 5000 STAM-09-18 -131- 254, You are given: (A portfolio consists of 100 identically and independently distributed risks. (ii) ‘The number of claims for each risk follows a Poisson distribution with mean 2. (iii) The prior distribution of 2 is: (0A) OF During Year 1, the following loss experience is observed: ‘Number of Claims ‘Number of Risks 0 90 i 7 2 2 3 1 Total 100) Calculate the Bayesian expected number of claims for the portfolio in Year 2. @ 8 B) 10 © (D) 12 ® 14 255. DELETED STAM-09-18 -132- 256. You are given: (i) The distribution of the number of claims per policy during a one-year period for 10,000 insurance policies is: 2 or more (ii) You fita binomial model with parameters m and q using the method of maximum likelihood. Calculate the maximum value of the loglikelihood function when m = 2. (A) -10,397 (B)-7,781 © 7,750 (PD) -6,931 ©) ~6,730 STAM-09-18 -133- 257. You are given: (i) i) (Over a three-year period, the following claim experience was observed for two insureds who own delivery vans: Year Insured 1 2 3 A ‘Number of Vehicles) 2 2 1 ‘Number of Claims 1 1 0 B ‘Number of Vehicles | N/A 3 2 Number of Claims [N/A 2 3 ‘The number of claims for each insured each year follows a Poisson distribution. Calculate the semiparametric empirical Bayes estimate of the claim frequency per vehicle for Insured A in Year 4. (A) (B) © @) ®) Less than 0.55 At least 0.55, but less than 0.60 At least 0.60, but less than 0.65, At least 0.65, but less than 0.70 At least 0.70 258. DELETED STAM-09-18 -134- 259. 260. You are given: (i) A hospital liability policy has experienced the following numbers of claims over a 10-year period: 10 2 4 06 2 4 5 4 2 (ii) Numbers of claims are independent from year to year. (iii) You use the method of maximum likelihood to fit a Poisson model. Calculate the estimated coefficient of variation of the estimator of the Poisson parameter. (A) 0.10 (B) 0.16 () 0.22 (D) 0.26 ©) 1.00 You are given: (i) Claim sizes follow an exponential distribution with mean 6. (ii) For 80% of the policies, @=8. Gil) For 20% of the polici A randomly selected policy had one claim in Year 1 of size 5 Calculate the Bayesian expected claim size for this policy in Year 2. (A) Less than 5.8 (B) Atleast 5.8, but less than 6.2 (C) Atleast 6.2, but less than 6.6 (D) Atleast 6.6, but less than 7.0 (E) Atleast 7.0 STAM-09-18 -135- 261. DELETED 262. You are given: (i) Attime 4 hours, there are 5 working light bulbs. (ii) The 5 bulbs are observed for p more hours (iii) ‘Three light bulbs burn out at times 5, 9, and 13 hours, while the remaining light bulbs are still working at time 4 + p hours. (iv) The distribution of failure times is uniform on (0,0) (¥) The maximum likelihood estimate of @ is 29, Calculate p. (A) Less than 10 (B) Atleast 10, but less than 12 (C) Atleast 12, but less than 14 (D) Atleast 14, but less than 16 (B) Atleast 16 STAM-09-18 -136- 263. You are given: wo (ii) (ii) (iv) w) The number of claims incurred in a month by any insured follows a Poisson distribution with mean 2 ‘The claim frequencies of different insureds are independent, ‘The prior distribution of A is Weibull with @ = 0.1 and 7 =2 Some values of the gamma function are T'(0.5) =1.77245, P(1) = 1, P(L-5) = 0.88623, T(2)=1 ‘Month | Number of Insureds [Number of Claims 1 100 10 2 150) 1 3 250 14 Calculate the Bihlmann-Straub credibility estimate of the number of claims in the next 12 months for 300 insureds. (A) )) © (D) (E) Less than 255 At least 255, but less than 275 At least 275, but less than 295 At least 295, but less than 3 At least 315 STAM-09-18 264. DELETED 265. DELETED 266. DELETED 267. You are given: @ (i (iii) ‘The annual number of claims for an individual risk follows a Poisson distribution with mean 2. For 75% of the risks, 2 =1 For 25% of the risks, 4 =3 A randomly selected risk had, claims in Year 1. The Bayesian estimate of this risk’s expected number of claims in Year 2 is 2.98. Calculate the Bidhlmann credibility estimate of the expected number of claims for this risk in Year 2, (A) (B) © @) ®) Less than 1.9 At least 1.9, but less than 2.3 At least, 3, but less than 2.7 At least 2.7, but less than 3.1 At least 3.1 268. DELETED 269. DELETED STAM-09-18 -138- 2770. Three individual policyholders have the following claim amounts over four years: Policyholder | Year | | Year 2 | Year 3 | Year 4 x 2 3 3 4 Y 5 5 4 6 Z 5 5 3 3 Using the nonparametric empirical Bayes procedure, calculate the estimated variance of the hypothetical means. (A) Less than 0.40 (B) Atleast 0.40, but less than 0.60 (©) Atleast 0.60, but less than 0.80 (D) Atleast 0.80, but less than 1.00 (E) Atleast 1.00 271. DELETED 272. You are given: (i) The number of claims made by an individual in any given year has a binomial distribution with parameters m = 4 and g. (ii) The prior distribution of q has probability density function n(q)=6q(l-q), 00 (ii) A sample of 20 losses resulted in the following: Interval _[ Number of Losse (0,10) 9 (10, 25] 6 (25,2) 5 Calculate the maximum likelihood estimate of 0. (A) 5.00 (B) 5.50 (C) 5.75 (D) 6.00 (EB) 6.25 STAM-09-18 -141- 277. 278. 279. You are given: (Loss payments for a group health policy follow an exponential distribution with unknown mean, (ii) A sample of losses is: 100 200 400 800 ©1400 3100 Using the delta method, calculate the approximation of the variance of the maximum likelihood estimator of (1500) (A) 0.019 (B) 0.025 (©) 0.032 (D) 0.039 (0.045 DELETED Loss amounts have the distribution function oy = {0 > OSx5100 x>100 An insurance pays 80% of the amount of the loss in exc 20, subject to a maximum payment of 60 per loss. ss of an ordinary deductible of Calculate the conditional expected claim payment, given that a payment has been made, (a) 37 (B) 39 © 8 (D) 47 © 49 STAM-09-18 -142- 280. A compound Poisson claim distribution has 4 =5 and individual claim amounts distributed as follows: x ot) 5 06 k 0.4 Where k> 5 The expected cost of an aggregate stop-loss insurance subject to a deductible of 5 is, 28.03. Calculate k: A) 6 ‘B) 7 © 8 Oo 9% © 10 281. DELETED STAM-09-18 143 - 282. 283. Agategate losses are modeled as follows: (The number of losses has a Poisson distribution with 2=3 (ii) The amount of each loss has a Burr distribution with a =3,@=2,7=1 (iii) ‘The number of losses and the amounts of the losses are mutually independent. Calculate the variance of aggregate losses. @ 12 (B) 14 © 16 (~D) 1 () 20 ‘The annual number of doctor visits for each individual in a family of 4 has a geometric distribution with mean 1.5. The annual numbers of visits for the family members are ‘mutually independent, An insurance pays 100 per doctor visit beginning with the 4th visit per family, Calculate the expected payments per year for this family. (A) 320 (B) 323 (©) 326 (D) 329 (©) 332 STAM-09-18 -144- 284. 285. A risk has a loss amount that has a Poisson distribution with mean 3. An insurance covers the risk with an ordinary deductible of 2. An alternative insurance replaces the deductible with coinsurance 0 , which is the proportion of the loss paid by the insurance, so that the expected insurance cost remains the same. Calculate & A) 02 (B) 0.27 (© 032 () 037 (©) 0.42 You are the producer for the television show Actuarial Idol. Each year, 1000 actuarial clubs audition for the show. The probability of a club being accepted is 0.20. The number of members of an accepted club has a distribution with mean 20 and variance 20. Club acceptances and the numbers of club members are mutually independent. ‘Your annual budget for persons appearing on the show equals 10 times the expected number of persons plus 10 times the standard deviation of the number of persons. Calculate your annual budget for persons appearing on the show, (A) 42,600 (B) 44,200 (©) 45,800 (D) 47,400 (E) 49,000 STAM-09-18 -145- 286. Michael is a professional stuntman who performs dangerous motorcycle jumps at extreme sports events around the world. The annual cost of repairs to his motore distribution with @=5000 and a =2 cle is modeled by a two parameter Pareto An insurance reimburses Michael’s motorcycle repair costs subject to the following provisions: (i) Michael pays an annual ordinary deductible of 1000 each yes (ii) Michael pays 20% of repair costs between 1000 and 6000 each year. (iii) Michael pays 100% of the annual repair costs above 6000 until Michael has paid 10,000 in out-of-pocket repair costs each year. (iv) Michael pays 10% of the remaining repair costs each year. Calculate the expected annual insurance reimbursement, (A) 2300 (B) 2500 (© 2700 (D) 2900 (E) 3100 STAM-09-18 -146- 287. 288. For an aggregate loss distribution S: (i) The number of claims has a negative binomial distribution with r= 16 and f= 6 (ii) The claim amounts are uniformly distributed on the interval (0, 8). (iii) The number of claims and claim amounts are mutually independent. Using the normal approximation for aggregate losses, calculate the premium such that the probability that aggregate losses will exceed the premium is 5%. (A) 500 (B) 520 © 540 (D) 560 © 580 ‘The random variable N has a mixed distribution: (i) With probability p, N’has a binomial distribution with q = 0.5 and m = 2. (i) With probability 1 — p, N has a binomial distribution with q = 0.5 and m = 4, Which of the following is a correct expression for Pr(N= 2)? (A) 0.125p* (B) 0.375+0.125p (©) 0375+0.125p? (p) 0375-0.125p? () — 0.375-0.125p STAM-09-18 -147- 289. A compound Poisson distribution has 2 =5 and claim amount distribution as follows: x pa) 100 0.80 500 0.16 1000 0.04 Calculate the probability that aggregate claims will be exactly 600 (A) (B) © @) (E) 0.022 0.038 0.049 0.060 0.070 290. DELETED 291. DELETED 292 DELETED 293 DELETED 294 veLET D 295 DELETED 296. DELETED 297. DELETED 298. 299, peL ETI STAM-09-18 - 148 - 300. 301. 302. 303. 304. 305. DELETED DELETED DELETED DELETED DELETED DELETED STAM-09-18 -149- Use the following information for Questions 306 and 307. Five models are fitted to a sample of 260 observations with the following results: ‘Model | Number of Parameters | Loglikelihood 1 1 ~414 1 2 ~412 im 3 =411 Vv, 4 409 Vv 6 409 306. (This question was formerly Question 266.) Determine the model favored by the ‘Schwarz Bayesian criterion. (A) (B) © @) ©) I u cit Vv v 307. (This question is effective with the October 2016 syllabus.) Determine the model favored by the Akaike Information criterion. (A) (B) ©. () ®) 1 1 rit IV v STAM-09-18 -150- 308. 309. ‘An insurance company sells a policy with a linearly disappearing deductible such that no payment is made on a claim of 250 or less and full payment is made on a claim of 1000 or more Calculate the payment made by the insurance company for a loss of 700. (A) 450 (B) 500 (C) 550 (D) 600 ®) 700 ‘The random variable X represents the random loss, before any deductible is applied, covered by an insurance policy. The probability density function of X is S(x)=2x, O 999 100) 200,000 Total 2100 598,500 Calculate the percentage reduction in loss costs by moving from a 100 deductible to a 250 deductible. (A) 25% (B) 27% (©) 29% (D) 31% ©) 33% Mr. Fixit purchases a homeowners policy with an 80% coinsurance clause. The home is insured for 150,000. The home was worth 180,000 on the day the policy was purchased. Lightning causes 20,000 worth of damage. On the day of the storm the home is worth 250,000. Calculate the benefit payment Mr. Fixit receives from his policy. (A) 15,000 (B) 16,000 (©) 17,500 (D) 18,000 ) 20,000 STAM-09-18 -152- 312. A company purchases a commercial insurance policy with a property policy 70,000. The actual value of the property at the time of a loss is 100,000. The insurance policy has a coinsurance provision of 80% and a 200 deductible, which is applied to the ss before the limit or coinsurance are applied. A storm causes damage in the amount of 20,000. Calculate the insurance company’s payment, (A) 15,840 (B) 16,000 (©) 17,300 (D) 17,325 (E) 19,800 313. Mini Driver has an automobile insurance policy with the All-Province Insurance ‘Company. She has 200,000 of third party liability coverage (bodily injury/property damage) and has a 1,000 deductible on her collision coverage. Mini is at fault for an accident that injures B. Jones, who is insured by Red Deer Insurance Company. M. Driver is successfully sued by B. Jones for Jones’ injuries. The court orders Driver to pay Jones 175,000. Other expenses incurred are: i) Legal fees to All-Provinee on behalf of Driver: 45,000 ii) Collision costs to repair Driver's car: 20,000 Calculate the total amount All-Province pays out for this occurrence. (A) 175,000 (B) 195,000 (©) 200,000 (D) 219,000 (BE) 239,000 STAM-09-18 -153- 314. You are given the following eamed premiums for three calendar years: Calendar Year | Earned Premium CYS 7,706 CY6 9,200 CYT 10,250 All policies have a one-year term and policy issues are uniformly distributed through each year. The following rate changes have occurred: Date Rate Change July 1, CY3 +7% Nov. 15, CYS = 4% ‘October 1, CY6 +5% Rates are currently at the level set on October 1, CY6, Calculate the earned premium at the current rate level for CY6. (A) 9300 (B) 9400 (© 9500 (D) 9600 (E) 9700 STAM-09-18 - 154- 315. You are given: i) Data for three territories as follows: Earned Premium | Incurred Claim | Current Territory | At Current Rates | Loss & ALAE | Count_| Relativity 1 520,000 420,000 600 0.60 2 1,680,000 1,250,000 1320 1.00 3 450,000 360,000 390 0.52 Total 2,650,000 2,030,000 | 2310 ii) The full credibility standard is 1082 claims and partial credibility is calculated using the square root rule. iii) The complement of credibility is applied to no change to the existing relativity. Calculate, using the loss ratio method, the indicated territorial relativity for Territory 3 (A) 0.52 (B) 053 © 054 (D) 055 ©) 056 STAM-09-18 -155- 316. You use the following information to determine a rate change using the loss ratio method. @ Accident | Earned Premium | Incurred | Weight Given to Year at Current Rates Losses Accident Year AY8 4252 2260 40% AY9 5765 2610 60% (i) Trend Factor: 7% per annum effective (iii) Loss Development Factor (to Ultimate): AY8: 1.08 AY9: 1.18. (iv) Permissible Loss Ratio: 0.657 (v)__ Allpolicies are one-year policies, are issued uniformly through the year, and rates will be in effect for one year. (vi) Proposed Effective Date: July 1, CY10 Calculate the required portfolio-wide rate change. (A) 26% (B) -16% © 8% (D) -1% ©) 7% STAM-09-18 - 156- 317. You are given: i) Policies are written uniformly throughout the year. ii) Policies have a term of 6 months. iii) ‘The following rate changes have occurred: Date ‘Amount ‘October 1, CYT 47%. July 1, CY2 +10% September 1, CY3 6%. Calculate the factor needed to adjust CY2 eared premiums to December 31, CY3 level (A) 097 (B) 0.98 (©) 0.99 () 1.00 ® 101 STAM-09-18 -1S7- 318. You are given the following information: Cumulative Loss Payments through Development Month Earned | Expected Accident | Premium | — Loss R 24 36 48 Year Ratio AYS 19,000 0.90 4,850 9,700_| 14,100 | 16,200 AY6 20,000 0.85 5,150 14,900 AY7 21,000 0.91 5,400 AYS 22,000 0.88 7,200 There is no development past 48 months. Calculate the indicated loss reserve using the Bornhuetter-Ferguson method and volume- weighted average loss development factors. (A) (B) © (D) ) 22,600 23,400 24,200 25,300 26,200 STAM-09-18 - 158 - 319. You are given the following information: i) ‘Cumulative Paid Losses through Accident Development Month Year 12 24 36 a8 ‘AYS 27,000 | 49,000 | 65,000_| 72,000 AY6 28,000_|_57,000_| 71,000 ‘AY7 33,000 | 65,000 ‘AYS8 35,000 ii) Selected Age-to-Age Paid Loss Interval Development Factors 12 =24 months 2.00 24-36 months 1.20 36 —48 months 115 48 — ultimate 1.00 iii) The interest rate is 5.0% per annum effective. Calculate the ratio of discounted reserves to undiscounted reserves as of December 31, cys. (A) 0.93 (B) 0.94 (© 0.95 () 0.96 () 097 STAM-09-18 -159- 320. You are given: i) ‘Accident ‘Cumulative Paid Losses through Development Year Earned | Year 0 1 2 3 4 5 premium AY4 1,400 | 5,200 [ 7,300 | 8.800 | 9,800 | 9,800 | 18,000 | AYS 2,200 | 6,400 | 8,800 | 10,200 | 11,500) 20,000 AY6 2,500 | 7,500 | 10,700 | 12,600 25,000 ‘AY7 2,800 [8,700 | 12,900 26,000 ‘AYS 2,500 | 7,900 27,000 AY9 2,600 28,000 | ii) The expected loss ratio for each Accident Year is 0.550. Calculate the total loss reserve using the Borhuetter-Ferguson method and three-year arithmetic average paid loss development factors. (A) @) ©) @) () 21,800 22,500 23,600 24,700 25,400 STAM-09-18 - 160- 321. You are given: i) An insurance company was formed to write workers compensation business in CYL. ii) Eamed premium in CY1 was 1,000,000. iii) Eamed premium growth through CY3 has been constant at 20% per year (compounded). iv) The expected loss ratio for AY is 60%. v) As of December 31, CY3, the company’s reserving actuary believes the expected loss ratio has increased two percentage points each accident year since the company’s inception vi) Selected incurred loss development factors are as follows: 12 to 24 months 1.500 24 to 36 months 1.336 36 to 48 months 1.126 48 to 60 months 057 (60 to 72 months 1.050 72.10 ultimate 1.000 Calculate the total IBNR reserve as of December 31, Ferguson method. 'Y3 using the Bornhuetter- (A) 964,000 (B) 966,000 (©) 968,000 (D) 970,000 (E) 972,000 STAM-09-18 -161- 322. You are given the following los as the average loss within each distribution probabilities for a liability coverage, as well terval: ‘Cumulative Size of Loss Interval _| Probability | Average Loss @, 1,000] 0.358, 300 (2,000, 25,000] 0.761 8,200 (25,000, 100,000] 0.879 47,500 (100,000, 250,000] 0.930 145,000 (250,000, 500,000] 0.956 325,000 (500,000, 1,000,000] 0.984 650,000 (1,000,000, 10,000,000] 1.000 3,700,000 Calculate the increased limits factor for a 1,000,000 limit when the basic limit is 100,000 and there is no loading for risk or expenses. A) 24 (B) 25 () 26 (Dp) 27 ® 28 STAM-09-18 - 162- 323. The following developed losses evaluated at various maximum loss sizes are given: ‘The total losses limited at 50,000 from all policies with a policy limit of 0,000 or more is 22,000,000. + The total losses limited at 50,000 from all policies with a policy limit of 250,000 or more is 14,000,000. ‘+ The total losses limited at 250,000 from all policies with a policy limit of 250,000 or more is 25,000,000. The base rate at the 50,000 basic limit is 300 per exposure unit, consisting of 240 pure premium, 30 fixed expense, and 30 variable expense. Calculate the rate at the 250,000 limit. (A) 370 (B) 400 © 450 (D) 480 510 324. A primary insurance company has a 100,000 retention limit, The company purchases a catastrophe reinsurance treaty, which provides the following coverage Layer 1: 85% of 100,000 excess of 100,000 Layer 2: 90% of 100,000 excess of 200,000 Layer 3: 95% of 300,000 excess of 300,000 ‘The primary insurance company experiences a catastrophe loss of 450,000. Calculate the total loss retained by the primary insurance company (A) 100,000 (B) 112,500 (©) 125,000 (D) 132,500 (B) 150,000 STAM-09-18 - 163 - 325. A primary liability insurer has a book of business with the following characteristics: + All policies have a policy limit of 500,000 ‘© The expected loss ratio is 60% on premiums of 4,000,000 A reinsurer provides an excess of loss treaty for the layer 300,000 in excess of 100,000. ‘The following table of increased limits factors is available: Limit ILF 100,000, 1.00 200,000 1.25 300,000 1.45 400,000 1.60 500,000 1.70 Calculate the reinsurer’s expected losses for this coverage (answer to the nearest 000s). (A) 840,000 (B) 847,000 (©) 850,000 (D) 862,000 (®) 871,000 STAM-09-18 - 164- 326. XYZ’s insurance premium is based on an experience rating plan that uses the total of the most recent three years experience compared to an expected pure premium of 475. The ‘most recent three years experience is provided: Manual | Earned | Developed Year _| Premium | Exposures | Losses cy 350,000 600 | 192,000 cy2 | 340,000 650__|_ 340,000 cy3 | 365,000 625 | 220,000 Total | 1,055,000| 1,875 | 752,000 Exposures :xposures + 23,000 ‘* Credibility is based on the formula: Z ‘© The CY4 manual premium for XYZ is determined to be 380,000. * XYZ also has a schedule rating credit of 10% that is applied after the experience rating modification, Calculate the CY4 experience rating premium for XYZ. (A) 319,000 (B) 338,000 (©) 357,000 (D) 375,000 (B) 394,000 STAM-09-18 - 165 - 327. An insurance company writes policies with three deductible options: 0, 100, and 500. Policyholders report all claims that are greater than or equal to the deductible, but do not always report claims that are less than the deductible, For the claims that policyholders report to the insurance company, historical loss experience for the three different policy types is as follows: Deductible 0 100 500 #of | Groundup | #of | Ground-up | #of | Ground-up Size of Loss_| Claims | Losses _| Claims | _Losses_| Claims | Losses 1-100 5 300) 2 100 0 0 101 - 200 8 1,400 4 600 0 0 201 - 500 4 1,500 2 750 0 0 501 or greater | 3 3,900 1 1,500 1 1,300 Total 20 7,100 9 2,950 1 1,300 ‘The company wants to introduce a 200 deductible option. Calculate the indicated relativity for the 200 deductible, using a base deductible of 100. (A) 8) © (D) ©) 0.62 0.66 0.76 0.79 0.80 STAM-09-18 - 166 - 328. Company XYZ sells homeowners insurance policies. You are given: i) The loss cos by accident year are: Accident Year | Loss Cost AY! 1300 AY2 1150 AY3 1550 AY4 1800 ii) The slope of the straight line fitted to the natural log of the loss costs is 0.1275, iii) Experience periods are 12 months in length. In average accident date is July 1. iv) The current experience period is weighted 80% and the prior experience period is weighted 20% for rate development. ich accident year the New rates take effect November 1, CYS for one-year policies and will be in effect for one year, Calculate the expected loss cost for these new rates, (A) 2124 (B) 2217 (©) 2264 (D) 2381 (2413 STAM-09-18 -167-

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