Liability Exposures Property Exposures

Amountof LossProbabilityof Loss Amoun tof LossProbabilityof Loss

$8,000,000.01 5$4,000,000.035

$0.985 $0.965

If the premium loading for the liability exposure is 35% of expected losses, what is the fair insurance premium for the liability exposure? (Dont be concerned with the time value of money.)

If the premium loading for the property exposure is 25% of expected losses, what isthe fair insurance premium for the property exposure? (Dont be concerned with thetime value of money?

If both the property & liability exposures are bundled together and covered under asingle contract that has a premium loading equal to 28% of the bundled expectedlosses, how much savings in premium will be achieved? (Assume these exposuresare independent and as before, dont be concerned with the time value of money.