Novus Property Insurer has a surplus-share reinsurance treaty with Royal Reinsurer. Novus has a retention limit of $400,000 on any single building, and up to 4 lines of insurance may be ceded to Royal Re.

a-What is the maximum amount of insurance that Novus can write on a single building under the reinsurance agreement? Explain your answer.

b- A building valued at $1,600,000 is insured with Novus. A fire causes a $750,000 loss to the building. How much will Novus pay? How much will Royal Re pay?