CAS Exam 8 Fall 2016, Question 20
Study guide: Exam 9
A primary insurer has entered into property catastrophe excess of loss treaties with three reinsurers. The terms of the treaties are as follows:
| Reinsurer | Terms |
|---|---|
| Reinsurer A | 100% of $100 excess of $200 written at a nominal rate on line of 10% |
| Reinsurer B | 100% of $100 excess of $300 written at a nominal rate on line of 7% |
| Reinsurer C | 100% of $100 excess of $400 written at a nominal rate on line of 4% |
Each treaty specifies a single mandatory reinstatement that is 100% pro rata as to amount. The primary insurer incurs three covered loss events during the contract period:
| Loss Number | Loss Amount |
|---|---|
| 1 | $380 |
| 2 | $260 |
| 3 | $600 |
Part a (0.75 points)
For each loss event, calculate the amount of loss retained by the primary insurer.
Part b (2.25 points)
For each loss event, calculate the amount of reinstatement premium owed by the primary insurer to each of its reinsurers.
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