Spring 2019 Q21 a)
Should it be INCREASING the quota share % since the % is applied to gross loss to get net loss and the net losses have increased in AY 2018?
Howdy, Stranger!
It looks like you're new here. If you want to get involved, click one of these buttons!
Quick Links
Categories
- 223 All Categories
- Practice Exam 1
- 1 Practice Exam 2
- 5 Practice Exam 3
- 2 Practice Exam 4
- 6 General
- 4 GENERAL - RESERVING
- F-01-Overview
- F-02-ClmsProcess
- 1 F-03-Data
- F-04-Meetings
- F-05-Triangles
- 2 F-06-Diagnostics
- 5 F-07-Development
- 6 F-08-ExpectedClms
- 7 F-09-BornFerg
- 3 F-10-CapeCod
- 12 F-11-FreqSev
- 2 F-12-CaseOS
- 11 F-13-BerqSherm
- 9 F-14-Recoveries
- 12 F-15-Evaluation
- F-16-ALAE
- 5 F-17-ULAE
- SOP.UnpaidClms
- ASOP12.RiskClassification
- ASOP13.Trend
- ASOP43.UnpaidClmEst
- 6 GENERAL - PRICING
- W-01-Intro
- W-02-Manuals
- 3 W-03-Data
- 9 W-04-Exposures
- 14 W-05-Premium
- 12 W-06-LossLAE
- 5 W-07-OtherExpenses
- 18 W-08-Indication
- 14 W-09-RiskClassification
- 3 W-10-Multivariate
- 10 W-11-SpecialClassification
- 4 W-12-Credibility
- 2 W-13-Other
- 14 W-14-Implementation
- 6 W-15-Commercial
- 3 W-16-ClaimsMade
- SOP.Ratemaking
- WernerA.Auto
- 2 WernerB.Home
- 1 WernerC.MedMal
- 3 WernerD.WC
- 1 WernerE.Univariate
- WernerF.Multivariate
Comments
Unfortunately, there is no consistency between various sources. In the Friedland text, a 70% quota-share arrangement means the primary insurer retains 70% of the gross business but in other sources, it means the primary insurer cedes 70% of the gross business. It looks like in this exam problem, they use the latter definition.
A clearer way to express that particular answer is to say the amount retained by the primary insurer increases. That way the confusion regarding the definition of quota-share is avoided.