Good Living Insurance Company specialises in underwriting personal accident insurance. Following a period of successful business development the management identified that it must increase its underwriting limits in order to maintain future profitable growth.

The management is concerned that its growth plans could bring a solvency strain and is further concerned that a large claim or catastrophe event loss could severely damage the company$$s solvency. The directors have made it clear that to raise additional capital is not an option available to the company and any increase must be generated from profitable growth. The directors have imposed the following financial limitations:

$$ The net premium income $($gross premium net of reinsurance$)$ must not be more than twice the amount of the capital and free reserves $($net assets$)$;

$$ The amount of reinsurance premium paid to reinsurers in any one year must not exceed $50\%$ of the company$$s gross earned premium income for that year.

The three$-$year gross financial forecast based on the proposed gross underwriting limits is:

Year Gross Earned Premium Acquisition Costs Gross Incurred Claims Underwriting Result Net Assets

$(000)$

$202430,00012,00015,0003,0007,500$

$202535,00014,00017,5003,5008,500$

$202640,00016,00020,0004,00010,000$

The increased underwriting limit proposed is $10,000,000$ any one person or known accumulation. B$)$ What would be the maximum net retained premium and reinsurance premium for each of the forecasted three years to comply with financial restrictions? Discuss what the repercussions are if a year's net retained premium surpasses the financial constraints.