2013 Fall Q22
Hi,
The Battlewiki states that quota-share percentage of 70% means net loss = $1,000 x 70% = $700
However, looking at this question, for the 20% quote share reinsurance treaty, the examiner's report calculates the net by multiplying (1-0.2=0.8) instead of 0.2.
May I know which one is correct?
Thank you!
Comments
The Friedland source text states that a 70% quota-share treaty means the primary insurer keeps 70% of the risk, but unfortunately this doesn't appear to be consistent with other sources of information. If you google the definition of quota-share reinsurance, you will find definitions where a 70% quota-share agreement means that 70% is ceded.
For this reason, it's a good idea to explicitly state your interpretation as a first step in doing any problem that uses quota-share percentages.