Question

Ba. Small Potatoes (SP) is a microchip company. On average, 45 percent of SP's product liability claims for a calendar year are reported during the calendar year. For 2018, 22 product liability claims were reported during the calendar year. How many product liability claims (ultimately) should SP expect for 2018? (1 point) b. SP's loss development factors for product liability and general liability are provided below: Months after End of Calendar Year: Product Liability 3.5 2 .6 1.4 1.1 General Liability 2 2.1 1.7 2.2 1.0 12 18 24 30 36 1. Two and half years after the end of a calendar year, general liability claims to-date were $2.4 million. What ultimate general liability claims should SP expect for this calendar year? (half-point) 2. Eighteen months after the end of a calendar year, product liability claims to-date were $1.8 million. What ultimate product liability claims should SP expect for this year? (half-point)

Answer 1

Answer:

8a. It is given that, On average, 45 percent of SP's product liability claims for the calendar year are reported during the calendar year. For 2018, 22 product liability claims were reported during the calendar year.

Therefore, Product liability claims (ultimately) should SP expect for 2018 are: 49 Product liability claims

= 22 Product liability claims / 45 % = 48..88 i.e 49 Product liability claims

8b. 1. It is given that Two and half years after the end of a calendar year, general liability claims to - date were $2.4 million.

Therefore, ultimate general liability claims should SP expect for this calendar year are : $ 6.4 million

= $ 2.4 million / 1.2 x 3.2 = $ 6.4 million

8b.2. Eighteen months after the end of a calendar year, product liability claims to - date were $ 1.8 million.

Therefore, ultimate product liability claims should SP expect for this year are : $ 2.1086 million

= $ 1.8 million / 3.5 x 4.1 = $ 2.1086 million