Question 4

Suppose Venus Liability Insurance has $400,000 retention limit for a single policy and five lines are ceded to Crown Re under surplus-share treaty agreement.

(a) Is Venus Insurance allowed to issue a liability insurance application with the sum of insured of $3,000,000?(4 marks)

(b) What is the underwriting capacity of Venus Insurance?(4 marks)

(c) Assume Venus Insurance issued a policy with $1,500,000 coverage for one year. A few weeks later a $1,000,000 claim in reported by the policy holder. How much are the shares of Venus and Crown Re companies on this claim? (10 marks)