Gamma Insurance has a treaty reinsurance agreement with Delta, such that Gamma has a retention limit of $2 million for any single policy, and $10 million are ceded to Delta based on a surplus-share treaty agreement. Gamma writes an insurance policy for $5 million to cover Martins building. 1- Determine the underwriting capacity of Gamma given this reinsurance agreement. (1 mark) 2- Based on the reinsurance agreement, determine how much of Martins insurance policy will: a. Gamma retain (1 mark) b. Delta retain (1 mark) 3- There is a fire at Martins building, causing losses of $1 million. Show your work.

a. Calculate how much of the loss would Gamma cover. (2 marks)

b. Calculate how much of the loss would Delta cover. (2 marks)