Exam 7 Practice Question 6
Study guide: Exam 7
A captive insurer's general liability losses for one accident year (in 000s) are:
- Selected ultimate loss gross of all reinsurance: 3,000
- Paid loss gross of all reinsurance: 1,200
- One large loss in that total, with an estimated ultimate of 500 and 50 paid to date
The captive has three reinsurance covers, applied in this order:
- Excess per occurrence reinsurance attaching at 100, with a limit large enough to cover the large loss in full.
- A quota share treaty under which the captive cedes 40%.
- Stop-loss reinsurance that caps the captive's retained losses, after the first two covers, at 1,500 for the accident year.
The excess per occurrence cover inures to the benefit of the quota share and the stop-loss, and the quota share inures to the benefit of the stop-loss. Paid losses are ceded on the same basis as ultimate losses.
Calculate the total unpaid losses ceded to all three covers.
- A) 720
- B) 780
- C) 960
- D) 1,020
- E) 1,240
Answer this question and see the worked solution