Alnakheel Insurance is a property insurer that entered into a surplus-share reinsurance treaty with Al Ain Re. Alnakheel has a retention limit of $200,000 on any single building, and up to nine lines of insurance may be ceded to Al Ain Re. A building valued at $1,600,000 is insured with Alnakheel. Shortly after the policy was issued, a severe windstorm caused a $800,000 loss tothe building.

a. How much of the loss will Alnakheel pay?

b. How much of the loss will Al Ain Re pay?

c. What is the maximum amount of insurance that Alnakheel canwrite on a single building under the reinsurance agreement? Explain your answer.