Problem 26-A
You are given the following about a large portfolio of insurance policies:
- For each insurance policy, the annual number of claims follows a binomial distribution with
= 3 and
= 0.3.
- The claim size follows an inverse Gamma distribution with
= 2.1 and
= 3.
- The number of claims and the claim sizes are independent.
- The full credibility standard has been selected so that actual claim costs will be
within 10% of expected claim costs 90% of the time.
Using limited fluctuation credibility, determine the expected number of claims required for full credibility.
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Problem 26-B
You are given the following about a large portfolio of insurance policies:
- For each insurance policy, the annual number of claims follows a binomial distribution with
= 6 and
= 0.1.
- The claim size follows a Gamma distribution with
= 0.8 and
= 1.
- The number of claims and the claim sizes are independent.
- The full credibility standard has been selected so that actual claim costs will be
within 10% of expected claim costs 90% of the time.
Using limited fluctuation credibility, determine the expected number of exposures required for full credibility.
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