CAS Exam 8 Fall 2013, Question 23
Study guide: Exam 9
A primary insurance company's actuary is evaluating the following three types of reinsurance contracts:
- 60% ceded quota share.
- Five-line surplus share treaty with retained line = $100,000.
- $400,000 xs $100,000 per-risk excess of loss.
In the most recent accident year, the company has experienced the following losses on its policies:
| Risk | Insured Value | Loss |
|---|---|---|
| A | $250,000 | $120,000 |
| B | $1,000,000 | $245,000 |
| C | $85,000 | $85,000 |
| D | $1,250,000 | $490,000 |
| E | $400,000 | $180,000 |
| Total | $2,985,000 | $1,120,000 |
Determine which reinsurance contract would result in the lowest retained losses for the insurance company.
Part a (2 points)
Answer this question and see the worked solution