Insurance Question

Question 6. (15 marks) ABC insurance company has a 40% quota share treaty reinsurance with XYZ reinsurance company incepts 1 January 2019 with a treaty coverage period of 12 months. The premium ceded to this reinsurance treaty are as follows. Inception Date of Premium payable of Original Policy original risk to reinsurer 14 May 120,000 2 September 60,000 10 December 150,000 6.1 This reinsurance treaty is accounted on a clean-cut basis using the twenty fourth-basis method. Calculate the outgoing premium for this account at the expiration of the treaty period. (5 marks) 6.2 This treaty specifies that XYZ reinsurance company will pay a 30% commission based on the incoming premium and a 10% profit commission. Explain the rationales for XYZ insurance company to pay the reinsurance commissions to ABC insurance company. (5 marks) 6.3 In this treaty, ABC insurance company would keep 50% of the losses between a 75% and 85% loss ratio. If the actual loss ratio is 80%, what would be the ceded loss ratio under this treaty? (5 marks) Question 6. (15 marks) ABC insurance company has a 40% quota share treaty reinsurance with XYZ reinsurance company incepts 1 January 2019 with a treaty coverage period of 12 months. The premium ceded to this reinsurance treaty are as follows. Inception Date of Premium payable of Original Policy original risk to reinsurer 14 May 120,000 2 September 60,000 10 December 150,000 6.1 This reinsurance treaty is accounted on a clean-cut basis using the twenty fourth-basis method. Calculate the outgoing premium for this account at the expiration of the treaty period. (5 marks) 6.2 This treaty specifies that XYZ reinsurance company will pay a 30% commission based on the incoming premium and a 10% profit commission. Explain the rationales for XYZ insurance company to pay the reinsurance commissions to ABC insurance company. (5 marks) 6.3 In this treaty, ABC insurance company would keep 50% of the losses between a 75% and 85% loss ratio. If the actual loss ratio is 80%, what would be the ceded loss ratio under this treaty