Reinsurance

Question 8. (15 marks) ABC insurance company has the following reinsurance program, A surplus share treaty with a line of 2 million with 6-line maximum. The gross retention of surplus share treaty is covered by a facultive excess of loss reinsurance with three layers: (1) 0.5 million excess of 0.5 million; (2) 0.5 million excess of 1 million; (3) 0.5 million excess of 1.5 million. Assume ABC insurance company use the above reinsurance treaty to cover the fire insurance of building that worths 12 million dollars. During the treaty period, a valid claim of 9 million occurred. 8.1. What is the total compacity of the surplus treaty? (4 marks) 8.2 What is the share of loss for the reinsurer covering the layer of 0.5 million excess of 1 million? (5 marks) 8.3 What are the advantages that ABC insurance company using three layers of excess of loss reinsurance to limit its net retention instead of using one excess of loss reinsurance? (6 marks) Question 8. (15 marks) ABC insurance company has the following reinsurance program, A surplus share treaty with a line of 2 million with 6-line maximum. The gross retention of surplus share treaty is covered by a facultive excess of loss reinsurance with three layers: (1) 0.5 million excess of 0.5 million; (2) 0.5 million excess of 1 million; (3) 0.5 million excess of 1.5 million. Assume ABC insurance company use the above reinsurance treaty to cover the fire insurance of building that worths 12 million dollars. During the treaty period, a valid claim of 9 million occurred. 8.1. What is the total compacity of the surplus treaty? (4 marks) 8.2 What is the share of loss for the reinsurer covering the layer of 0.5 million excess of 1 million? (5 marks) 8.3 What are the advantages that ABC insurance company using three layers of excess of loss reinsurance to limit its net retention instead of using one excess of loss reinsurance? (6 marks)