9. SA Logistix is a transport company that operates across South Africa. The company has a fleet of specialised vehicles to transport a wide range of products such as fresh foodstuffs, chemicals, and hazardous products.

The company is preparing for the annual insurance review. The Board of SA Logistix has instructed the Chief Financial Officer (CFO) and the Chief Risk Officer (CRO) to determine the appropriate risk financing strategies for the fleet. To determine the risk financing alternatives, the CRO recommended that the maximum probable yearly aggregate loss (MPY) must be calculated for the fleet.

The historical financial data of the fleet is incomplete and certain critical components need to be calculated. Claims inflation forms a significant component of the total claims cost per accident and for that reason it is important to include claims inflation in the data. For the purpose of this exercise, the CRO defined claims inflation as the administration cost and effect of exchange rate fluctuation. The board of Logistix stated in the last annual report that the company adopted a conservative risk appetite. Exchange rates have a significant effect on claims inflation as 40% of claims cost is in foreign currency.

Refer to the table for the annual inflation rate and appropriate exchange rate. The historical information available for the fleet is as follows:

YEAR	ANNUAL INFLATION RATE	ZAR/USD	% OF CLAIMS COST IN FX	NUMBER OF VEHICLES	BUDGETED COST PER VEHICLE	NUMBER OF ACCIDENTS	AVERAGE DAMAGE PER ACCIDENT	CLAIMS ADMIN
2013	4,56%	11,2	40%	120	R 1 800 000	50	R 100 000	R 9 000
2014	4,89%	12,5	40%	120	R 1 900 000	60	R120 000
2015	5%	13,2	40%	120	R 2 000 000	60	R135 000
2016	5,32%	15,9	40%	150	R 2 100 000	70	R150 000
2017	5,42%	15,8	40%	150	R 2 200 000	70	R170 000
2018	5,75%	16,7	40%	150	R 2 300 000	90	R200 000
2019	5,83%	17,5	40%	150	R 2 700 000	90	R230 000
2020	7,13%	19,8	40%	150	R 2 750 000	80	R255 000
2021	7,43%	20,6	40%	150	R 2 800 000	100	R270 000
2022	7,80%	22,5	40%	150	R 2 850 000	90	R300 000

Question

Calculate the total cost per event for the year 2013 by incorporating the information provided in the table above.

a.

R60 000

b.

R40 000

c.

R109 000

d.

R100 000