(a) What is an open-perils coverage?

(b) Name and describe the clause that requires all owners to insure 80 percent of their property value without penalty on the insureds’ losses recovery

(c) Based on the provided information, calculate the pure premium rate per $10,000 of insurance for all apartment owners. Show ALL workings.

(d) Based on the provided information, calculate the gross premium per owner of the 4,000 apartments insured by XYZ Insurance. Show ALL workings.

(e) Based on the provided information, calculate the total amounts of losses that will be paid by Swiss reinsurer under surplus-share treaty on 3 total fire losses, 50 partial fire losses at $400,000 each and 100 partial fire losses at $80,000 each. Show ALL workings.

XYZ Insurance is a general insurer in property insurance. Assume that XYZ Insurance insured 4,000 apartments valued at $4,000,000 each. As stated in the policy, it is an open-perils coverage and all owners are required to insure 80 percent of their property value without penalty on the insureds’ losses recovery. To determine the premium, the actuary of XYZ Insurance forecasts the occurrence of fire losses this year. There are 3 total fire losses, 50 partial fire losses at $400,000 each and 100 partial fire losses at $80,000 each. XYZ Insurance places an expense loading of 15 percent, in which it is a portion of the gross premium to cover its administrative and maintenance costs. The gross premium consists of pure premium and expense loading. In addition, adequate reinsurance is part of the requirements as an authorized insurer. Hence, XYZ Insurance enters a surplus-share treaty with a retention limit of $800,000 for a single policy, and that up to ten lines are ceded to Swiss Reinsurer.