Which of the following is NOT a type of change actuaries should look for when analyzing trends?

Prepare for the CAS Exam 6 with detailed study materials. Use flashcards and multiple-choice questions, each with hints and explanations, to get exam-ready!

Multiple Choice

Which of the following is NOT a type of change actuaries should look for when analyzing trends?

When analyzing trends, focus is on changes that directly alter the amount or distribution of losses the portfolio is exposed to. Shifts in mix of business (like exposure type and geography) change how often and how severely losses occur. Changes in policy limits affect the maximum payout the carrier faces, which can alter observed loss severity and frequency patterns. Adjustments to reinsurance attachment points and limits change how much of the loss the insurer bears versus what is ceded, which directly influences net loss experience and trend. The presence of external audits, while important for data quality and governance, does not itself change the underlying risk exposure or policy/term structure that drives loss trends. It’s about assurance of data rather than a shift in risk characteristics, risk transfer, or coverage terms.

When analyzing trends, focus is on changes that directly alter the amount or distribution of losses the portfolio is exposed to. Shifts in mix of business (like exposure type and geography) change how often and how severely losses occur. Changes in policy limits affect the maximum payout the carrier faces, which can alter observed loss severity and frequency patterns. Adjustments to reinsurance attachment points and limits change how much of the loss the insurer bears versus what is ceded, which directly influences net loss experience and trend.

The presence of external audits, while important for data quality and governance, does not itself change the underlying risk exposure or policy/term structure that drives loss trends. It’s about assurance of data rather than a shift in risk characteristics, risk transfer, or coverage terms.

More practice questions