Zurich Insurance is a property insurer that entered into a surplus-share reinsurance treaty with Geneva Re. Zurich has a retention limit of $100,000 on any single building, and up to seven lines of insurance may be ceded to GenevaRe. A building valued at $800,000 is insured with Zurich. Shortly after the policy was issued, a severe windstorm caused a $400,000 loss to the building.
a. How much of the loss will Zurich pay?
b. How much of the loss will Geneva Re pay?
c. What is the maximum amount of insurance that Zurich can write on a single building under the reinsurance agreement? Explain your answer.