Please Just Check Work

1. Assume a pro rata treaty reinsurance agreement with 35% retention. Further assume a primary insurance contract with limits of $2,500,000, premiums of $20,000 and deductible $10,000 fall within the treatys definition.

a) If a loss of $80,000 occurs, how much of that amount would the policyholder pay? 10,000

b) How much premium will the primary insurance company retain under the treaty agreement? 80,000-10,000 = 70,000 70,000*.35 = 24,500

c) How much premium will the reinsurance company receive under the treaty agreement? 80,000-10,000 = 70,000 70,000*65 = 45,000

d) If a loss of $250,000 occurs, how much will each of the following parties pay?

1) Policyholder pays: 10,000

2) Primary insurer pays: 240,000*.35 = 84,000

3) Reinsurer pays: 240,000*.65 = 156,000

e) If a loss of $100,000 occurs, how much will each of the following parties pay?

1) Policyholder pays: 10,000

2) Primary insurer pays: 90,000*.35 = 31,500

3) Reinsurer pays: 90,000*.65 = 58,500