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In 2005 a risk has a two-parameter Pareto distribution with a = 2 and 0-3000 . In 2006 losses inflate by 20%. An insurance

In 2005 a risk has a two-parameter Pareto distribution with a= 2 and 0-3000. In 2006 losses inflate by 20%.

In 2005 a risk has a two-parameter Pareto distribution with a = 2 and 0-3000 . In 2006 losses inflate by 20%. An insurance on the risk has a deductible of 600 in each year. P, the premium in year i, equals 1.2 times the expected claims. The risk is reinsured with a deductible that stays the same in each year. R, the reinsurance premium in year i, equals 1.1 times the expected reinsured claims. R2005/ P2005 0.55. Calculate R2006 / P2006. (A) 0.46 (B) 0.52 (C) 0.55 (D) 0.58 (E) 0.66

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