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CAS Tail Factor Working Party Overview

Attachment 10. CAS Tail Factor Working Party Overview. Tony Phillips, FCAS Co-Chair Steve Herman, FCAS Co-Chair 2004 CLRS, Las Vegas Session 7: Research Working Party Kick-off. Attachment 10. Tail Factor Working Party - Overview. Tail factors are widely used,

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CAS Tail Factor Working Party Overview

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  1. Attachment 10 CAS Tail Factor Working PartyOverview • Tony Phillips, FCAS Co-Chair • Steve Herman, FCAS Co-Chair 2004 CLRS, Las Vegas Session 7: Research Working Party Kick-off

  2. Attachment 10 Tail Factor Working Party - Overview • Tail factors • are widely used, • have a huge impact on results, and • there is minimal literature on the subject. • Today for the first time in CAS history we have at this CLRS, multiple sessions dealing with the subject.

  3. Attachment 10 Tail Factor Working Party - Overview • Importance of Tail Factors • Impact on Reserve Values and Pricing • Long tail lines with a small change in the tail factor can lead to a large change in reserve dollars • Generally not identified as important in pricing • Impact on Financial and other aspects of a company • For example, a line of business in “Runoff“, the tail can determine staffing needs • Impact on “under-reserving” and financial failures

  4. Attachment 10 Tail Factor Working Party - Overview • Methods used to determine the tail factor • Fit to Curves (e.g. Inverse Power) • Bondy Method • Generalized Bondy Development (as developed by Al Weller) • Select last age-to-age factor (development factor) • New methods just identified in the • Sherman/Diss paper • Tail factor presentation today by Joe Boor and others • Others • What are the pros and cons of the varying methods

  5. Attachment 10 Tail Factor Working Party - Overview • The product for this Working Party will be a paper which will • Survey existing literature • Identify additional methods in use • If needed, identify further areas that may need to be researched. • Product may provide examples of results using identified methods on industry data. • The purpose is both to educate students and to help practitioners. It may become part of the syllabus and/or be included in a reserving textbook.

  6. Attachment 10 Tail Factor Working Party - Timetable Task Time Frame 1. Recruit/select members September 2004 1a. Hold conference call with entire working party Early October 2004 2. Draft outline of paper October 2004 -November 2004 3. Identify existing literature October 2004 - December 2004 a. Assign WP members to write summaries of methods in identified papers 4. Survey Practitioners October 2004 - December 2004 a. Have WP members survey their own workplaces and colleagues for methods, write summary 5. Time off for year-end, tie up loose ends January 2005 -February 2005 6. Compile input, identify gaps and write paper March 2005 - April 2005 7. Review paper, make revisions May 2005 - June 2005

  7. Attachment 10 Tail Factor Working Party - Size of Working Party • More then a casual commitment to the Working Party • Members expected to do research • Mustconsider timetable • Viewing 15-20 members as being ideal. • Large group could become harder to manage and less actionable unless enough people step up to lead sub groups • Smaller group might not have enough resources for the task

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