Re: Marker/Mohl: Rating Claims-Made Insurance Policies

AMFMPIP@aol.com
Mon, 29 Mar 1999 16:05:31 EST

4/9 is the proportion of Report year 1, Lag 0's exposure that is covered by a
mature claims-made policy written 1/3 of the way through year j,
1/9 is the proportion of Report year 2, Lag 0's exposure, that is covered by a
mature claims-made policy written 1/3 of the way through year j,
and 2/9 is the proportion of Report Year 2, lag 1's exposure. that is covered
by a mature claims-made policy written 1/3 of the way through year j.

The total exposure area for the mature claims-made policy written 1/3 of the
way through year 1 is 1/2*1*1 = 1/2. (the shaded are in the graph)

In order to find the earned exposures for this policy, you have to take
4/9'ths of the exposure from report year 1, lag 0 (4/9)*(1/2)(1)(1) = 4/18,

Plus the 1/9th of the exposure from report year 2, lag 0 (1/9)*(1/2)(1)(1) =
1/18

Plus 2/9th the exposure from Report year 2, lag 1 (2/9)*(1) = 4/18

If you add these up, they add up to 1/2 which is the area in the graph which
represents the mature claims made policy written 1/3 of the way through year
j.

I don't know if this explanation is very clear. I hope it helps.