CAS Exam 8 Fall 2014, Question 24
Study guide: Exam 9
A reinsurer is offering a property catastrophe cover of $10,000,000 in excess of $10,000,000 per occurrence with one reinstatement to an insurer. The reinsurance broker produces a catastrophe model with the following output for losses in excess of $10,000,000.
Part a (0.5 points)
Calculate the pure premium using the payback approach.
Part b (0.5 points)
The treaty incepts on July 1, 2014 with a premium of $1,200,000. The insurer experiences a catastrophe loss on December 1, 2014 resulting in total loss amount of $15,000,000. Calculate the reinstatement premium given the reinstatement provision is 115% pro-rata as to amount.
Part c (1.25 points)
The insurer also purchases a 30% quota share treaty which inures to the benefit of the catastrophe treaty. Calculate the amount paid under each treaty and the insurer's net loss.
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