(a) Provide a detailed discussion on the characteristics of the two methods of reinsurance i.e. facultative and treaty reinsurance. Make sure to include a detailed discussion on the various forms of treaty reinsurance in your answer. [30 marks] (b) A large and well-established insurance company would like to get reinsurance for their motor book-of-business. Their losses generally consist of a large number of very small losses (high frequency, low severity losses) with very few large losses occurring every year (low frequency, high severity losses). From your answer in (a) above, which type of reinsurance would be best suited for this insurance company? Provide a detailed rationale for your choice. In addition, make use of an example and graphically illustrate how your choice would work. [15 marks] (c) Insurer X concludes a 60% quota-share treaty with reinsurer Y. A risk of R350 000 is insured with insurer X. How is this risk shared between insurer X and reinsurer Y assuming it falls within the scope of the treaty? Provide a detailed explanation of your calculation. [5 marks]