Does any one know why the answer is C (at least 62,500, but less than 70,000)? My answer is 75,000.
Here's the question:
Cal yr 2004 paid ulae = 25,000
Loss reserve at 12/31/2003 = 1,000,000
Cal yr 2004 loss payments = 250,000
Cal yr 2004 incurred losses = 500,000
IBNR % of loss reserve at 12/31/2004 = 20%
60% of a claim's ulae expense is paid when opened with the remaining expense paid at closing
Using the paid ulae to paid loss method, what is the ulae reserve as of 12/31/2004?