2. (a) Outline and discuss the different types of reinsurance arrangements. [60 marks] (b) The excess of loss (XL) reinsurance is broadly divided into types i.e., Covers Per Risk (WXL/R) and Covers Per Catastrophic Event (CatXL). Suppose that after application of all proportional reinsurance covers, a direct insurer's retention is 8 million. To further protect its retention from major loss, the insurer then buys a WXL/R cover of 6 million xs 2 million. As additional protection from catastrophic events (earthquakes, for example) the insurer also buys CatXL with the limits 9 million xs 4 million. Calculate the distribution of losses amongst the three (re)insurers i.e., direct insurer, WXL/R reinsurer and CatXL reinsurer in the following three scenarios. Scenario 1: A fire loss of 1 million. Scenario 2: A major fire loss of 7 million. Scenario 3: An earthquake loss of 9 million arising from five risks i.e., Risk A: 1 million, Risk B: 1 million, Risk C: 1 million, Risk D: 2 million, and Risk E: 4 million. [40 marks]