(a)Milan Insurance is a property insurer that entered into a surplus-share reinsurance treaty with Aman Re. Milan has a retention limit of $300,000 on any single building, and up to seven lines of insurance may be ceded to Aman Re. A building valued at $2,200,000 is insured with Milan. Shortly after the policy was issued, a severe windstorm caused an $800,000 loss to the building.

(i) How much of the loss will Milan pay?(6 marks)

(ii)How much of the loss will Aman Re pay?(4 marks)

(iii) What is the maximum amount of insurance that Delta can write on a single building under the reinsurance agreement? Explain your answer.

(4 marks)

(b)What is the meaning of reinsurance? (4 marks)

(c)Briefly explain the reasons for reinsurance.(4 marks)

(d)Explain the meaning of "securitization of risk." (3 marks)