Al Ettihad Insurance Company is specialized in property and casualty insurance. Al Ettihad deals with Geneva Re as its reinsurer.

Questions:

1- Suppose Al Ettihad has a surplus-share treaty with Geneva Re Reinsurance. Al Ettihad has a retention limit of $250,000, and $2,000,000 are ceded to Geneva Re (eight lines of insurance).

How much will Geneva Re pay if a $1,200,000 building insured by Al Ettihad suffers an $600,000 loss?

2- Assume Al Ettihad Insurance Company and Geneva Re enter into a quota-share arrangement by which losses and premiums are shared 40% for Al Ettihad and 60% for Geneva Re. If a $700,000 loss occurs, how much Al Ettihad will pay to the insured and how much Geneva Re will reimburse Al Ettihad?