CAS Exam 8 Fall 2013, Question 22

Study guide: Exam 9

An actuary for a reinsurer uses the following exposure curve to price a non-proportional treaty with the assumption that b = 0.1:

$G(x) = \frac{(1 - b^x)}{(1 - b)}$

The maximum possible loss for the reinsurer is $50 million and the ratio of pure risk premium retained by the cedant is 65%.

Calculate the cedants maximum retention under the treaty.

Part a (1.5 points)