1.

You are given:

(i) Losses follow a loglogistic distribution with cumulative distribution function:

( x /  )
F ( x) 
1  ( x /  )
(ii) The sample of losses is:
10 35 80 86 90 120 158 180 200 210 1500

Calculate the estimate of  by percentile matching, using the 40th and 80th empirically
smoothed percentile estimates.

(A) Less than 77

(B) At least 77, but less than 87

(C) At least 87, but less than 97

(D) At least 97, but less than 107

(E) At least 107

2. You are given:

(i) The number of claims has a Poisson distribution.

(ii) Claim sizes have a Pareto distribution with parameters   0.5 and   6

(iii) The number of claims and claim sizes are independent.

(iv) The observed pure premium should be within 2% of the expected pure premium 90%
of the time.

Calculate the expected number of claims needed for full credibility.

(A) Less than 7,000

(B) At least 7,000, but less than 10,000

(C) At least 10,000, but less than 13,000

(D) At least 13,000, but less than 16,000

(E) At least 16,000

-2-
3. You study five lives to estimate the time from the onset of a disease to death. The times to
death are:
2 3 3 3 7

Using a triangular kernel with bandwidth 2, calculate the density function estimate at 2.5.

(A) 8/40

(B) 12/40

(C) 14/40

(D) 16/40

(E) 17/40

4. You are given:

(i) Losses follow a single-parameter Pareto distribution with density function:


f ( x)  , x  1, 0    
x 1

(ii) A random sample of size five produced three losses with values 3, 6 and 14, and two
losses exceeding 25.

Calculate the maximum likelihood estimate of  .

(A) 0.25

(B) 0.30

(C) 0.34

(D) 0.38

(E) 0.42

-3-
5. You are given:
(i) The annual number of claims for a policyholder has a binomial distribution with
probability function:
 2
p( x | q)    q x (1  q) 2 x , x  0,1, 2
 x
(ii) The prior distribution is:
 (q)  4q3 , 0  q  1

This policyholder had one claim in each of Years 1 and 2.

Calculate the Bayesian estimate of the number of claims in Year 3.

(A) Less than 1.1

(B) At least 1.1, but less than 1.3

(C) At least 1.3, but less than 1.5

(D) At least 1.5, but less than 1.7

(E) At least 1.7

6. For a sample of dental claims x1 , x 2 , , x10 , you are given:

(i) x i  3860 and x 2
i  4,574,802

(ii) Claims are assumed to follow a lognormal distribution with parameters  and 

(iii)  and  are estimated using the method of moments.

Calculate E[ X  500] for the fitted distribution.

(A) Less than 125

(B) At least 125, but less than 175

(C) At least 175, but less than 225

(D) At least 225, but less than 275

(E) At least 275

-4-
7. DELETED

8. You are given:

(i) Claim counts follow a Poisson distribution with mean  .

(ii) Claim sizes follow an exponential distribution with mean 10 .

(iii) Claim counts and claim sizes are independent, given  .

(iv) The prior distribution has probability density function:

5
 ( )  6 ,   1

Calculate Bühlmann’s k for aggregate losses.

(A) Less than 1

(B) At least 1, but less than 2

(C) At least 2, but less than 3

(D) At least 3, but less than 4

(E) At least 4

9. DELETED

10. DELETED

-5-
11. You are given:

(i) Losses on a company’s insurance policies follow a Pareto distribution with

probability density function:


f (x |  )  , 0 x
( x   )2

(ii) For half of the company’s policies   1 , while for the other half   3 .

For a randomly selected policy, losses in Year 1 were 5.

Calculate the posterior probability that losses for this policy in Year 2 will exceed 8.

(A) 0.11

(B) 0.15

(C) 0.19

(D) 0.21

(E) 0.27

12. You are given total claims for two policyholders:

Year
Policyholder 1 2 3 4
X 730 800 650 700
Y 655 650 625 750

Using the nonparametric empirical Bayes method, calculate the Bühlmann credibility
premium for Policyholder Y.

(A) 655

(B) 670

(C) 687

(D) 703

(E) 719

-6-
13. A particular line of business has three types of claim. The historical probability and the
number of claims for each type in the current year are:

Historical Number of Claims

Type
Probability in Current Year
X 0.2744 112
Y 0.3512 180
Z 0.3744 138

You test the null hypothesis that the probability of each type of claim in the current year is
the same as the historical probability.

Calculate the chi-square goodness-of-fit test statistic.

(A) Less than 9

(B) At least 9, but less than 10

(C) At least 10, but less than 11

(D) At least 11, but less than 12

(E) At least 12

14. The information associated with the maximum likelihood estimator of a parameter  is 4n,
where n is the number of observations.

Calculate the asymptotic variance of the maximum likelihood estimator of 2 .

(A) 1/(2n)

(B) 1/n

(C) 4/n

(D) 8n

(E) 16n

-7-
 15. You are given:

(i) The probability that an insured will have at least one loss during any year is p.

(ii) The prior distribution for p is uniform on [0, 0.5].

(iii) An insured is observed for 8 years and has at least one loss every year.

Calculate the posterior probability that the insured will have at least one loss during Year 9.

(A) 0.450

(B) 0.475

(C) 0.500

(D) 0.550

(E) 0.625

16-17. Use the following information for questions 16 and 17.

For a survival study with censored and truncated data, you are given:

Number at Risk
Time (t) at Time t Failures at Time t
1 30 5
2 27 9
3 32 6
4 25 5
5 20 4
16. The probability of failing at or before Time 4, given survival past Time 1, is 3 q1 .
Calculate Greenwood’s approximation of the variance of 3 q̂1 .

(A) 0.0067

(B) 0.0073

(C) 0.0080

(D) 0.0091

(E) 0.0105

-8-
17. Calculate the 95% log-transformed confidence interval for H(3), based on the Nelson-Aalen
estimate of this value of the cumulative hazard function.

(A) (0.30, 0.89)

(B) (0.31, 1.54)

(C) (0.39, 0.99)

(D) (0.44, 1.07)

(E) (0.56, 0.79)

18. You are given:

(i) Two risks have the following severity distributions:

Probability of Claim Probability of Claim

Amount of Claim Amount for Risk 1 Amount for Risk 2
250 0.5 0.7
2,500 0.3 0.2
60,000 0.2 0.1

(ii) Risk 1 is twice as likely to be observed as Risk 2.

A claim of 250 is observed.

Calculate the Bühlmann credibility estimate of the second claim amount from the same risk.

(A) Less than 10,200

(B) At least 10,200, but less than 10,400

(C) At least 10,400, but less than 10,600

(D) At least 10,600, but less than 10,800

(E) At least 10,800

-9-
19. You are given:

(i) A sample x1 , x2 , , x10 is drawn from a distribution with probability density function:

1  1  x / 1  x / 
f ( x)  e  e , x  0
2   

(ii)  

(iii) x i  150 and x2

i  5000

Estimate  by matching the first two sample moments to the corresponding population
quantities.

(A) 9

(B) 10

(C) 15

(D) 20

(E) 21

20. You are given a sample of two values, 5 and 9.

1
You estimate Var(X) using the estimator g ( X1 , X 2 ) 
2
 ( X i  X )2 .

Calculate the bootstrap approximation of the mean square error of g.

(A) 1

(B) 2

(C) 4

(D) 8

(E) 16

- 10 -
21. You are given:

(i) The number of claims incurred in a month by any insured has a Poisson distribution
with mean  .

(ii) The claim frequencies of different insureds are independent.

(iii) The prior distribution is gamma with probability density function:

(100 )6 e100
f ( ) 
120

(iv) Month Number of Insureds Number of Claims

1 100 6
2 150 8
3 200 11
4 300 ?

Calculate the Bühlmann-Straub credibility estimate of the number of claims in Month 4.

(A) 16.7

(B) 16.9

(C) 17.3

(D) 17.6

(E) 18.0

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22. You fit a Pareto distribution to a sample of 200 claim amounts and use the likelihood ratio
test to test the hypothesis that   1.5 and   7.8 .

You are given:

(i) The maximum likelihood estimates are ˆ  1.4 and ˆ  7.6 .

(ii) The natural logarithm of the likelihood function evaluated at the maximum likelihood
estimates is 817.92.

(iii)  ln( x  7.8)  607.64

i

Determine the result of the test.

(A) Reject at the 0.005 significance level.

(B) Reject at the 0.010 significance level, but not at the 0.005 level.

(C) Reject at the 0.025 significance level, but not at the 0.010 level.

(D) Reject at the 0.050 significance level, but not at the 0.025 level.

(E) Do not reject at the 0.050 significance level.

- 12 -
23. For a sample of 15 losses, you are given:

(i) Observed Number of

Interval Losses
(0, 2] 5
(2, 5] 5
(5,  ) 5

(ii) Losses follow the uniform distribution on (0, ) .

3 ( E j  O j )2
Estimate  by minimizing the function j 1 Oj
, where E j is the expected number of

losses in the jth interval and O j is the observed number of losses in the jth interval.

(A) 6.0

(B) 6.4

(C) 6.8

(D) 7.2

(E) 7.6

- 13 -
24. You are given:

(i) The probability that an insured will have exactly one claim is  .

(ii) The prior distribution of  has probability density function:

3
 ( )   , 0    1
2
A randomly chosen insured is observed to have exactly one claim.

Calculate the posterior probability that  is greater than 0.60.

(A) 0.54

(B) 0.58

(C) 0.63

(D) 0.67

(E) 0.72

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25. The distribution of accidents for 84 randomly selected policies is as follows:
Number of Accidents Number of Policies
0 32
1 26
2 12
3 7
4 4
5 2
6 1
Total 84

Which of the following models best represents these data?

(A) Negative binomial

(B) Discrete uniform

(C) Poisson

(D) Binomial

(E) Either Poisson or Binomial

- 15 -
26. You are given:

(i) Low-hazard risks have an exponential claim size distribution with mean  .

(ii) Medium-hazard risks have an exponential claim size distribution with mean 2 .

(iii) High-hazard risks have an exponential claim size distribution with mean 3 .

(iv) No claims from low-hazard risks are observed.

(v) Three claims from medium-hazard risks are observed, of sizes 1, 2 and 3.

(vi) One claim from a high-hazard risk is observed, of size 15.

Calculate the maximum likelihood estimate of  .

(A) 1

(B) 2

(C) 3

(D) 4

(E) 5

- 16 -
27. You are given:

(i) X partial = pure premium calculated from partially credible data

(ii)   E[ X partial ]

(iii) Fluctuations are limited to  k  of the mean with probability P

(iv) Z = credibility factor

Determine which of the following is equal to P.

(A) Pr[  k   X partial    k  ]

(B) Pr[Z   k  ZX partial  Z   k ]

(C) Pr[Z     ZX partial  Z    ]

(D) Pr[1  k  ZX partial  (1  Z )  1  k ]

(E) Pr[  k   ZX partial  (1  Z )    k  ]

- 17 -
28. You are given:

Claim Size (X) Number of Claims

(0, 25] 25
(25, 50] 28
(50, 100] 15
(100, 200] 6

Assume a uniform distribution of claim sizes within each interval.

Estimate E ( X 2 )  E[( X  150)2 ] .

(A) Less than 200

(B) At least 200, but less than 300

(C) At least 300, but less than 400

(D) At least 400, but less than 500

(E) At least 500

- 18 -
29. You are given:
(i) Each risk has at most one claim each year.

(ii)
Annual Claim
Type of Risk Prior Probability Probability
I 0.7 0.1
II 0.2 0.2
III 0.1 0.4

One randomly chosen risk has three claims during Years 1-6.

Calculate the posterior probability of a claim for this risk in Year 7.

(A) 0.22

(B) 0.28

(C) 0.33

(D) 0.40

(E) 0.46

- 19 -
30. You are given the following about 100 insurance policies in a study of time to policy
surrender:
(i) The study was designed in such a way that for every policy that was surrendered, a
new policy was added, meaning that the risk set, rj , is always equal to 100.

(ii) Policies are surrendered only at the end of a policy year.

(iii) The number of policies surrendered at the end of each policy year was observed to be:

1 at the end of the 1st policy year

2 at the end of the 2nd policy year
3 at the end of the 3rd policy year

n at the end of the nth policy year

(iv) The Nelson-Aalen empirical estimate of the cumulative distribution function at time
n, Fˆ (n) , is 0.542.

Calculate the value of n.

(A) 8

(B) 9

(C) 10

(D) 11

(E) 12

31. You are given the following claim data for automobile policies:
200 255 295 320 360 420 440 490 500 520 1020

Calculate the smoothed empirical estimate of the 45th percentile.

(A) 358

(B) 371

(C) 384

(D) 390

(E) 396

- 20 -
32. You are given:
(i) The number of claims made by an individual insured in a year has a Poisson
distribution with mean .

(ii) The prior distribution for  is gamma with parameters   1 and   1.2 .

Three claims are observed in Year 1, and no claims are observed in Year 2.

Using Bühlmann credibility, estimate the number of claims in Year 3.

(A) 1.35

(B) 1.36

(C) 1.40

(D) 1.41

(E) 1.43

33. In a study of claim payment times, you are given:

(i) The data were not truncated or censored.

(ii) At most one claim was paid at any one time.

(iii) The Nelson-Aalen estimate of the cumulative hazard function, H(t), immediately
following the second paid claim, was 23/132.

Calculate the Nelson-Aalen estimate of the cumulative hazard function, H(t), immediately
following the fourth paid claim.

(A) 0.35

(B) 0.37

(C) 0.39

(D) 0.41

(E) 0.43

- 21 -
34. The number of claims follows a negative binomial distribution with parameters  and r,
where  is unknown and r is known. You wish to estimate  based on n observations,
where x is the mean of these observations.

Determine the maximum likelihood estimate of  .

(A) x / r2

(B) x /r

(C) x

(D) rx

(E) r2x

35. You are given the following information about a credibility model:

Bayesian Estimate of
First Observation Unconditional Probability Second Observation
1 1/3 1.50
2 1/3 1.50
3 1/3 3.00

Calculate the Bühlmann credibility estimate of the second observation, given that the first
observation is 1.

(A) 0.75

(B) 1.00

(C) 1.25

(D) 1.50

(E) 1.75

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36. For a survival study, you are given:

(i) The product-limit estimator Sˆ (t0 ) is used to construct confidence intervals for S (t 0 ) .

(ii) The 95% log-transformed confidence interval for S (t 0 ) is (0.695, 0.843).

Calculate Sˆ (t0 ) .

(A) 0.758

(B) 0.762

(C) 0.765

(D) 0.769

(E) 0.779

37. A random sample of three claims from a dental insurance plan is given below:

225 525 950

Claims are assumed to follow a Pareto distribution with parameters   150 and  .

Calculate the maximum likelihood estimate of  .

(A) Less than 0.6

(B) At least 0.6, but less than 0.7

(C) At least 0.7, but less than 0.8

(D) At least 0.8, but less than 0.9

(E) At least 0.9

- 23 -
38. An insurer has data on losses for four policyholders for 7 years. The loss from the ith
policyholder for year j is X ij .

You are given:

4 7 4

 ( X ij  X i )2  33.60,
i 1 j 1
(X
i 1
i  X )2  3.30

Using nonparametric empirical Bayes estimation, calculate the Bühlmann credibility factor
for an individual policyholder.

(A) Less than 0.74

(B) At least 0.74, but less than 0.77

(C) At least 0.77, but less than 0.80

(D) At least 0.80, but less than 0.83

(E) At least 0.83

- 24 -
39. You are given the following information about a commercial auto liability book of business:

(i) Each insured’s claim count has a Poisson distribution with mean  , where  has a
gamma distribution with   1.5 and   0.2 .

(ii) Individual claim size amounts are independent and exponentially distributed with
mean 5000.

(iii) The full credibility standard is for aggregate losses to be within 5% of the expected
with probability 0.90.

Using limited fluctuated credibility, calculate the expected number of claims required for full
credibility.

(A) 2165

(B) 2381

(C) 3514

(D) 7216

(E) 7938

40. You are given:

(i) A sample of claim payments is: 29 64 90 135 182

(ii) Claim sizes are assumed to follow an exponential distribution.

(iii) The mean of the exponential distribution is estimated using the method of moments.

Calculate the value of the Kolmogorov-Smirnov test statistic.

(A) 0.14

(B) 0.16

(C) 0.19

(D) 0.25

(E) 0.27

- 25 -
41. You are given:
(i) Annual claim frequency for an individual policyholder has mean  and variance  2 .

(ii) The prior distribution for  is uniform on the interval [0.5, 1.5].

(iii) The prior distribution for  2 is exponential with mean 1.25.

A policyholder is selected at random and observed to have no claims in Year 1.

Using Bühlmann credibility, estimate the number of claims in Year 2 for the selected
policyholder.

(A) 0.56

(B) 0.65

(C) 0.71

(D) 0.83

(E) 0.94

42. DELETED

- 26 -
43. You are given:

(i) The prior distribution of the parameter  has probability density function:

1
 ( )  , 1  
2
(ii) Given    , claim sizes follow a Pareto distribution with parameters   2 and  .

A claim of 3 is observed.

Calculate the posterior probability that  exceeds 2.

(A) 0.33

(B) 0.42

(C) 0.50

(D) 0.58

(E) 0.64

44. You are given:

(i) Losses follow an exponential distribution with mean  .

(ii) A random sample of 20 losses is distributed as follows:

Loss Range Frequency

[0, 1000] 7
(1000, 2000] 6
(2000,  ) 7

Calculate the maximum likelihood estimate of  .

(A) Less than 1950

(B) At least 1950, but less than 2100

(C) At least 2100, but less than 2250

(D) At least 2250, but less than 2400

(E) At least 2400

- 27 -
45. You are given:

(i) The amount of a claim, X, is uniformly distributed on the interval [0, ] .

500
(ii) The prior density of  is  ( )  ,   500 .
2

Two claims, x1  400 and x2 600 , are observed. You calculate the posterior
distribution as:

 6003 
f ( | x1 , x2 )  3  4  ,   600
  

Calculate the Bayesian premium, E ( X 3 | x1 , x2 ) .

(A) 450

(B) 500

(C) 550

(D) 600

(E) 650

46. The claim payments on a sample of ten policies are:

2 3 3 5 5+ 6 7 7+ 9 10+

+ indicates that the loss exceeded the policy limit

Using the Kaplan-Meier product-limit estimator, calculate the probability that the loss on a
policy
exceeds 8.

(A) 0.20

(B) 0.25

(C) 0.30

(D) 0.36

(E) 0.40

- 28 -
47. You are given the following observed claim frequency data collected over a period of 365
days:

Number of Claims per Day Observed Number of Days

0 50
1 122
2 101
3 92
4+ 0

Fit a Poisson distribution to the above data, using the method of maximum likelihood.

Regroup the data, by number of claims per day, into four groups:

0 1 2 3+

Apply the chi-square goodness-of-fit test to evaluate the null hypothesis that the claims
follow a Poisson distribution.

Determine the result of the chi-square test.

(A) Reject at the 0.005 significance level.

(B) Reject at the 0.010 significance level, but not at the 0.005 level.

(C) Reject at the 0.025 significance level, but not at the 0.010 level.

(D) Reject at the 0.050 significance level, but not at the 0.025 level.

(E) Do not reject at the 0.050 significance level.

- 29 -
48. You are given the following joint distribution:


X 0 1
0 0.4 0.1
1 0.1 0.2
2 0.1 0.1

For a given value of  and a sample of size 10 for X:

10

x
i 1
i  10

Calculate the Bühlmann credibility premium.

(A) 0.75

(B) 0.79

(C) 0.82

(D) 0.86

(E) 0.89

- 30 -
49. You are given:

x 0 1 2 3
Pr[X = x] 0.5 0.3 0.1 0.1

The method of moments is used to estimate the population mean,  , and variance,  2 ,
2
By X and Sn 
 ( X i  X )2
, respectively.
n

Calculate the bias of S n2 , when n = 4.

(A) –0.72

(B) –0.49

(C) –0.24

(D) –0.08

(E) 0.00

- 31 -
50. You are given four classes of insureds, each of whom may have zero or one claim, with the
following probabilities:

Class Number of Claims

0 1
I 0.9 0.1
II 0.8 0.2
III 0.5 0.5
IV 0.1 0.9

A class is selected at random (with probability 0.25), and four insureds are selected at
random from the class. The total number of claims is two.

If five insureds are selected at random from the same class, estimate the total number of
claims using Bühlmann-Straub credibility.

(A) 2.0

(B) 2.2

(C) 2.4

(D) 2.6

(E) 2.8

51. DELETED

52. With the bootstrapping technique, the underlying distribution function is estimated by which
of the following?

(A) The empirical distribution function

(B) A normal distribution function

(C) A parametric distribution function selected by the modeler

(D) Any of (A), (B) or (C)

(E) None of (A), (B) or (C)

- 32 -