Page 146 - ic92 actuarial
P. 146
The Insurance Times
effect of unusual or catastrophic occurrences, as may
experience rating plans. If projected ultimate losses are
to be used in retrospective rating calculation, they can
be developed in a number of ways similar to those used
to develop projected ultimate losses used to determine
manual rates.
Projected ultimate losses are often based on paid or
reported losses at a particular date. The expected losses
are a function of the current exposure. The exposure
component should be related to the experience
component, as detailed above.
As in experience rating, the expected losses are usually
a product of an expected loss rate and the exposure
base. As is also true for experience rating, the exposure
base used should reflect the underlying risk of loss and
ALAE. It is not always possible to use the theoretically
optimal exposure base.
In practice , insurers and nontraditional risk financing
mechanisms often use whatever exposure base insurers
Website: www.bimabazaar.com Call: 033-22184184 /40078428 146
Copyright@ The Insurance Times. 09883398055 / 09883380339
