Practice Exam 7 1. You are given: Aggregate losses follow a compound Poisson model. (ii) Claim sizes follow a Weibull distribution with @ = 1000 and + 0.25 Limited fluctuation credibility methods are used. The standard for full credibility Is that actual aggre- gate losses should be within 10% of expected aggregate losses with probability 99%. Determine the number of expected claims needed for full credibility. (A) Less than 44,000 (B) Atleast 44,000, but less than 45,000 (©) Atleast 45,000, but less than 46,000 (D) Atleast 46,000, but less than 47,000 (©) Atleast 47,000 2 You are given that before any deductible: (i) Claim counts follow a negative binomial distribution with r=2, 6 (ii) Claim sizes follow a Pareto distribution with a=2, @ = 1000. (ii) Claim counts and claims sizes are independent. ‘An insurance coverage has an annual deductible of 500. Four years of experience are to be simulated. Use the following uniform random numbers to simulate claim counts: 02 05 03 06 ‘Use the following uniform random numbers in order as needed to simulate claim sizes: 042 031 0.27 0.10 065 098 0.27 0.50 Calculate simulated average annual payments. (a) 33 (B) 44 O65 (D) 87 @ 131 3. Losses follow a lognormal distribution with =5 and o =2, Calculate the loss elimination ratio for a deductible of 500. (A) Less than 0.20 (B) Atleast 0.20, but less than 0.25, (©) Atleast 0.25, but less than 0.30 (D) Atleast 0.30, butiess than 0.35, (B) Atleast 0.35 /4Sty Manto cion 1009 etises continue on the next page. opi oa Nt1010 PART VI. PRACTICE EXAMS 4-5. Use the following information for questions 4 and 5: You are given: (i) An insured’ loss size follows a single-parameter Pareto distribution with parameters a=3 and 0. (i) The parameter 6 varies by insured uniformly on [500, 1000} (i) An insured submits claims of 700, 1200, 1000. 4. Calculate the posterior probability that 6 is less than 600 for this insured. . () 015 @) 016 (© 017 (D) 018 ( 019 5. Using Bihlmann credibility methods, estimate the expected size of the next claim. (A) Less than 950 (B) Atleast 950, but less than 1000 {C)_ Atleast 1000, but less than 1050 (D) Atleast 1050, but less than 1100 (©) _ Atleast 1100 6. You have the following observations of a random variable: ol 02 05 1 2 An inverse gamma distribution is fitted to the data using the method of moments, matching the first two negative moments. Determine the fitted value of a (A) Less than 0.8 (B) Atleast 0.8, but less than 0.9 (©) Atleast 0, but less than 1.0 (D) Atleast 1.0, but ess than 1.1 (© Atleast 1.1 7. Ina mortality study on 10 lives, death times are2, 2,4, 6, 7and censored observations ae a times 1, 2,4, 5.8 ‘H(7) is estimated using the Nelson-Aalen estimator. Estimate Var( (7) using the approximating formula in Loss Models. (a) 040 (B) 041 (©) 042 @) 043 (© 048 8. For an insurance coverage, losses are in the following ranges: Range __| Number of Losses 0-100 30 1000-3000, 15 e 3000-00 5 Fitan exponential distribution to the data using maximum likelihood. Calculate the average payment per loss for a coverage with an ordinary deductible of 500. (a) 239 (B) 375 (©) 465 (D) 567 © 739 (4d Manat enon ‘Buertses continue on the nex page. opr e200 ASPRACTICE EXAM 7 101 Loss sizes follow a frailty model. You are given: © a(x)=24 (i) A follows a gamma distribution with a =3 and @ = 1/2,000,000. Determine the unconditional median loss size. (A) Less than 750 (B) Atleast 750, butless than 1000 (C) Atleast 1000, but less than 1250 (D) AtTeast 1250, bu less than 1500 ©) Atleast 1500 10, Loss sizes X follow a lognormal distribution with parameters u=3, Caleulate TVaRo.2a(). (A) Less than 4,000 (B) Atleast 4,000, but less than 5,000, (©) Atleast 5,000, but ess than 6,000, (D) Atleast 6,000, but less than 7,000 (©) Atleast 7,000 11, Asample consists of the following 8 observations: 13 4 6.7 Non [A.uniform kernel with bandwidth 5 is used to smooth the empirical distribution based on this sample. Determine the point of the kernel-smoothed distribution for which the probability density function is max- imized, wa ws a7 os @n 12, Losses are assumed to follow a distribution with cumulative distribution function ~05e"#!" 0.509 FAs) [A sample of observations has a median of 12. Fit @ by matching medians. 67 B) 80 © 92 () 108, © 125 13. Foran insurance coverage: Claim counts follow a negative binomial distribution with r=0.2, =.) (i) Claim sizes follow a Pareto distribution with = 2000. Using the normal approximation, calculate the probability that aggregate losses are less than 12. (A) 0.504 (B) 0.508 (© 0512 ©) 0516 © 0.520 /4.Saty Manal—h eon rete continue on dhe nex page. ‘opi cao1012 PART VL. PRACTICE EXAMS 14, X|0 isuniform on (0,8). The prior density of @ is the improper density 70) 1<0 ‘The number of claims for the following year is estimated using empirical Bayes semiparametric methods. It {assumed that each policyholder’s annual claims follow a Poisson distribution. Unbiased estimators are used {for the expected value of the process variance and the variance of the hypothetical means. Calculate the credibility projection of the annual number of claims for policyholder A. oa (B) 05 O25 (29 (40 4st Manas eton -Berses continue on the next page. (opt czas ASPRACTICE EXAM 7 1013 18 The number of claims per year on an insurance coverage has a binomial distribution with parameters ‘and Q. Q varies by insured and has a uniform distribution on [0,0.5] For an insured selected at random, 1 claim is submitted in 2 years, Determine the posterior expectation for the number of claims per year for thi (A) Less than 0.40 (B) Atleast 0.40, but less than 0.50 (C) Atleast 0.50, but less than 0.60 (D) Atleast 0.60, but less than 0.70 (©) Atleast 0.70 19. You are given the following information for loss sizes: Probability Mean oflosses Variance of losces ofrange _inthisrange ___in this range Range (0.10) 05 4 10 0,20) oa 2 10 (20,00) ot 35 25 Let X be the loss size random variable. Caleulate Var(X 120). (A) Less than 34 (B) Atleast 34, but less than 36, (C) Atleast 36, but ess than 38 (D) Atleast 38, butless than 40 (©) Atleast 40 20. Loss sizes on an insurance coverage, X, have the cumulative distribution function Fa)= [—* ¥<10, t= ipa 0<¥< 10,000 An insurance coverage has a franchise deductible of 1000. Calculate the ratio of expected payments to expected losses for this insurance coverage. (a) 0.76 (8) 0.80 (© 083 ) 097 © 099 21. Fora discrete distribution, you are given Pe k>0 ™ Determine pe. (a) 0.02 (B) 0.03 (© 0.04 (D) 005, (®) 006 (Sey Manta eon Eseries continue onthe next page. pyri e200 tt1014 PART VI. PRACTICE EXAMS 22. You are given the following experience for losses for 2 policyholders over a period of 3 years: Policyholder Year! Year2 Year3 A 0 2d B lo-x 2-x 4x Empirical Bayes nonparametric methods are used to assign credibility to this experience. Determine the range of values of x for which the credibility factor assigned by empirical Bayes nonparamet- ric methods is greater than zero. (A) x>133 (B) x> 1.63 (0) x>2 (D) x>267 x>4 23. Claims follow an exponential distribution with mean @ given that © = 0. The probability density function for @is, (2500/0)*¢-¥00/0 Fol0)=—g=— Fora policyholder selected at random, the following claims are observed: a>0 600 800 200 5001200 600 Determine the posterior expected claim size from this policyholder. (a) 375 (B) 390 (©) 500 (D) 540 (B) 600 24. In amortality study, you are given the following: (i) Bach death occurs ata distinet time. (ii) No one leaves the study other than by death, (iil) The standard deviation of the Nelson-Aalen estimator of H(y4) after 4 deaths is 0.09800. Caleulate the Greenwood estimate of the standard deviation of the product limit estimator of S(y,). (A) Less than 0.07 (B) Atleast 0.07, but less than 0.08 (C) Atleast 0.08, but less than 0.09 (D) Atleast 0.09, but less than 0.10 (©) Atleast 0.10 25. _Xisa mixture of a uniform distribution on (0, 10] and a uniform distribution on (5,10), with each compo- nent of the mixture having equal weight. Calculate the 75th percentile of X. w 7 me (© a oe we (Study Manta eiton ‘Boriss continue on the next page. (Copy czas asPRACTICE EXAM 7 1015 26. Arandom variable follows the probability density function 2x fa)=F osxs0 ‘Asample x;,....% is drawn from the population. Calculate the bias of max(1,..., 29) aan estimator for 6. (a) -0/n (B) -8/(n+1)— () -8/(2n) (D) -#/(@n+1) — (E) -0/(2n +2) 27. Policyholders are in one of two groups, A and B. For these two groups, claim counts and sizes are dis tuibuted as follows: Group A Group B Claim counts [Probability | Count] [Probability [ Count 05 0 05 0 05, 2 o4 4 on 8 Claim sizes 500 250 You are given: Policyholders are equally likely to bein each group. (i) Fora randomly selected policyholder, aggregate claims are 1000. Calculate the Bayesian credibility estimate of aggregate claims forthe same policyholder in the next period. a sa (8) 549 (0 54 ) 559 (©) 564 28, Foran insurance coverage, you are given: (Claim counts follow a Poisson distribution with mean A. i) 2 varies by policyholder according to a gamma distribution. (ii) Bayesian methods are used to assign credibility. (iv) fa policyholder submits 5 claims in 10 periods, the expected number of claims from the policyholder ish. () Ifa policyholder submits 30 claims in 20 periods, the expected number of claims from the policyholder is 1.2. Determine the prior expected number of claims. (a) 106 (8) 1.07 (©) 1.08 (D) 1.09 © 1:10 29. Youare given: () The number of claims follows a Poisson distribution with mean 2, i) Exactly half ofthe policies submitted at least one claim. The exact number of claims submitted by these policies is unknown. Determine the maximum likelihood estimate of 2. (a) 06 (8) 07 (© 08 D) 09 10 (4d Mansi eion Ezra continue on the nex page ‘Copp e20 ASM1016 PART VI. PRACTICE EXAMS 30. Arandom distribution is assumed to follow a two-parameter Pareto distribution with @=3, The parame- ter 6 of the Pareto distribution is estimated using simulation, Determine the number of runs required so that the estimated mean is within 0.5% of the true mean with probability 0.90. (A) 154,000 (B) 216,000 (©) 325,000 (D) 433,000 (©) 461,000 31. Loss counts have the following distribution: Number of | Probability losses 0 03 1 o4 2 ol 3 02 Loss sizes follow a zero-truncated Poisson distribution with 2 Stop-loss reinsurance reimburses the excess of aggregate losses over 3. Calculate the expected value of retained losses. (A) Less than 1.5 (B) Atleast 1.5, but less than 1.6 (©) Atleast 1.6, but less than 1.7 (D) Atleast 17, but less than 1.8 (B) Atleast 1.8 382. For forty policies, observed claim counts in a year are 1 for thirty policies and 2 for the other ten policies. ‘The observed claim counts are fitted to a Sibuya distribution using maximum likelihood. Determine r. (@) -05, (8) -06 (©) -067 @) -0.75 © -08 83. Losses under three auto liability coverages are assumed to have the same distribution. You have the fol- lowing claims information: Coverage Deductible Maximum covered loss ‘Amounts paid on losses 1 500 5,000 1000, 3000, 4500 (not above limit), and one above li 2 1,000 10,000 +2000, 4000, 5000 3 1,000 5,000 2000, 4000 (not above limit), and one above limit Using the Kaplan-Meier estimator on the combined data, estimate the average payment per loss forthe first coverage. a) 2767 (8) 3100 (©) 3250 (D) 3600 ® 3750 (14S anaath eon verte continue onthe nex page Copyright eat attPRACTICE EXAM 7 1017 34, You are given the following 20 bodily injury losses (before the deductible is applied): Toss Numberof | Deductible [Policy Limit Losses 750 3 200 ~ 200 3 0 10,000 300 4 0 20,000 > 10,000 6 0 10,900 400 4 300 oo Past experience indicates that these losses follow an exponential distribution. Determine the maximum likelihood estimate of 8. (a) 3193 (B) 3218 (© 3259 (0) 4561 (©) 4596 36. An insurance coverage has a deductible of 5. The following loss sizes (including the deductible) are ob- served: 10 12 15 15 18 32 0. ‘The data are fitted to an inverse exponential with Calculate the Kolmogorov-Smirnov statistic forthe fit. (a) 0268, (B) 0.269 (@) 0310 (D) 0326 © 0368 Solutions to the above questions begin on page 1123, (Seay Mansion Copa ozo as