Reinsurance Assignment (Show your calculation)

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 treaty's definition.

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

b)How much premium will the primary insurance company retain under the treaty agreement?

20,000x35%=7000

c)How much premium will the reinsurance company receive under the treaty agreement?

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

1)Policyholder pays: _______________

2)Primary insurer pays: _______________

3)Reinsurer pays: _______________

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

1)Policyholder pays:_______________

2)Primary insurer pays: _______________

3)Reinsurer pays: _______________

2.Assume a per-risk excess of loss facultative reinsurance agreement with deductible of $1,000,000 and policy limit of $5,000,000 is in place. For a primary policy with deductible of $50,000 and policy limit of $6,000,000, how much will the policyholder, ceding company and reinsurer pay?

a)For a loss of $1,000,000,

1)Policyholder pays: _______________

2)Ceding insurer pays: _______________

3)Reinsurer pays: _______________

b)For a loss of $4,000,000,

1)Policyholder pays: _______________

2)Ceding insurer pays: _______________

3)Reinsurer pays: _______________