SOA Exam FAM Sample Question 50
Study guide: Exam FAM
In Year 1 a risk has a Pareto distribution with \alpha = 2 and \theta = 3000. In Year 2 losses inflate by 20%.
An insurance on the risk has a deductible of 600 in each year. P_i, the premium in year i, equals 1.2 times the expected claims.
The risk is reinsured with a deductible that stays the same in each year. R_i, the reinsurance premium in year i, equals 1.1 times the expected reinsured claims.
\frac{R_1}{P_1} = 0.55
Calculate \dfrac{R_2}{P_2}.
- A) 0.46
- B) 0.52
- C) 0.55
- D) 0.58
- E) 0.66
Answer this question and see the worked solution