Question
Bluth Insurance Company writes a property insurance contract on a skyscraper in California. The policy has a $50 million limit. Bluth wants to cede some
Bluth Insurance Company writes a property insurance contract on a skyscraper in California. The policy has a $50 million limit. Bluth wants to cede some of this risk in a facultative reinsurance contract with Austero Re. They are considering their options.
1. One option is an excess-of-loss contract with a $10 million retention limit. If they went with this option and there was a fire in the skyscraper which caused $20 million of damage, how much would Austero Re pay?
2. Another option is a surplus-share contract with a $10 million retention limit. If they went with this option and there was a fire in the skyscraper which caused $20 million of damage, how much would Austero Re pay?
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Corporate Finance Core Principles and Applications
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford
3rd edition
978-0077971304, 77971302, 978-0073530680, 73530689, 978-0071221160, 71221166, 978-0077905200
