Fall 2018 Q12 d)
First of all, how do I know that 60% refers to the amount that is ceded to the reinsurer? I thought that the quota share percentage refers to the losses retained by the insurer.
Second of all, how does the excess of loss retention work? Is this applied to reported claims? In particular, I'm not understanding how claim C and D net of reinsurance is calculated. If it is applied to reported claims, how is the case o/s accounted for since the incremental reported would be paid + change in case, is it possible that in a previous period the reported amount is greater than 1500 so the reinsurance for losses greater than 1500 are ceded but then there is downward development causing losses to end up less than that? Then what happens to the losses that were ceded?
Thank you.
Comments
Which problem is this? It isn't 2018-Fall-Q12.
Note: The exam problems are in consistent when they give you a percentage for the quota-share, and this problem has an error. If the quota-share percentage is 60% then according to the Friedland text, the primary insurer keeps 60%. This has come up before in exam problems so my advice is to always state your assumptions.