Question
Geilo Auto Insurance signed a single-trigger IRM contract with Suisse Re to manage its underwriting and investment risks. The aggregate retention R is set to
- Geilo Auto Insurance signed a single-trigger IRM contract with Suisse Re to manage its underwriting and investment risks. The aggregate retention R is set to be 85% of net earned premium. The net earned premium for Geilo Auto Insurance is $2 billion. The aggregate limit is $550 million.
Assume in the end of the year Geilos underwriting loss ratio is 90% and it has a $200 million investment income. What is the aggregate loss ratio for IRM purpose? Will Geilo Auto Insurance receive payments from the Suisse Re? If yes, how much?
If Geilos underwriting loss ratio is 95%, and investment loss is 700 million, what is the aggregate loss ratio for IRM purpose? Will Geilo Auto Insurance receive payments from the Suisse Re? If yes, how much?
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Principles of Finance
Authors: Scott Besley, Eugene F. Brigham
6th edition
9781305178045, 1285429648, 1305178041, 978-1285429649
