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Math 524 Loss Models II Assessment 3: April 29, 2021

The document contains a 4 question assessment on loss models. It provides information on Poisson distributions, credibility factors, and using Bühlmann credibility and semiparametric estimation to solve problems involving claim amounts, numbers of claims, and risk classifications.

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Muhammad Hafizudeen
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21 views

Math 524 Loss Models II Assessment 3: April 29, 2021

The document contains a 4 question assessment on loss models. It provides information on Poisson distributions, credibility factors, and using Bühlmann credibility and semiparametric estimation to solve problems involving claim amounts, numbers of claims, and risk classifications.

Uploaded by

Muhammad Hafizudeen
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Math 524 Loss Models II

Assessment 3: April 29, 2021

Name:

Read all questions carefully. If any questions are unclear, request clarification!

This is an open-book, open-note assessment. You may use a calculator, Excel, Mathemat-
ica, etc.

You may not collaborate with friends, classmates, “experts” on the internet,
etc.

Please show all work, justify your answers, and circle your answer if it isn’t obvious. You
must show your work to receive credit.

Question Possible Actual


1 15
2 15
3 15
4 15
Total 60

1
You must read, sign, and return the statement below, in which you agree to adhere to the
Community Standards of Academic Integrity.

If you do not wish to print out the document - if you are solving the problems on plain
paper - please simply write on the first page of your paper, “I agree to the Standards of
Academic Integrity” and sign your name.

Statement of Adherence to the Community Standards of Academic Integrity


By signing my name on the line below, I affirm that I have neither given nor received unau-
thorized aid on this examination, nor have I concealed any violations of LSAs Community
Standards of Academic Integrity. In particular, I have not taken or attempted any action
that may result in an unfair academic advantage for me or an unfair academic advantage
or disadvantage for any other member of the academic community.

Signature:

2
1. (15 points) The number of claims per year follows the Poisson distribution with
parameter . The value of is uniformly distributed on (1,7). A particular insured
had 12 claims over the past two years.

Use Bühlmann credibility to estimate the number of claims for this insured in the
third year.

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2. (15 points) A portfolio of 1,000 independent insureds is subdivided into two classes
as follows. In the table that follows, N represents number of claims per insured
(policyholder), X represents severity (amount) per claim, and ✓ represents the class,
A or B.

Class # of Insureds E[N |✓] Var(N |✓) E[X|✓] Var(X|✓)


A 250 1 0.5 4 16
B 750 2 1 8 16

You are given:

• Claim count and severity for each insured are independent.


• A risk is selected at random and observed for one period. The observed pure
premium (aggregate claim amount) for the period is 8.

Compute the Bühlmann credibility estimate of the pure premium (aggregate claim
amount) for the second period.

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3. (15 points) You are given the following information

• The number of claims for a single risk follows a Poisson distribution with mean
.
• is a random variable having a prior gamma distribution with mean 2.
• The value of k for Bühlmann credibility is 0.5.
• After six periods, the posterior distribution is gamma with mean 4.

Determine the number of claims observed in the six periods.

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4. (15 points) The number of claims per year for each insured in a population has
Poisson distribution. The distribution of insureds by number of actual claims in a
single year is shown below:

# of claims # of insureds
0 150
1 30
2 20
3+ 0

Use semiparametric estimation to determine the credibility factor Z.

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