Spring 2017 - 19.a

dancas6dancas6
in OSFI.MCT

Hi there,

Can someone help me interpret the reinsurance table provided in question 19? I am kind of lost on what 25000 xs 0, 25000 xs 25000 mean, etc... Also, I'd appreciate some explanation on how the reinsurance coverage was calculated; more importantly where the 13,536 came from (in the examiner's report).

Thanks!

Comments

  • javidjavid

    So:
    25000 xs 0 = 0-25000,
    25000 xs 25000 = 25000-50000
    100000 xs 50000 = 50000-150000
    100000 xs 150000 = 150000-250000

    They essentially represent layers of loss. In general 'A xs B' represents the layer of loss from "B" to "B + A".

    Now, the questions gives you the coverage for each layer (under the "ceded to reinsurer" column). For example, for the layer 25000-50000, the reinsurer would cover 50%.

    Now, with respect to the 13,536, notice above that the layers end at 250000. However, the canada-wide exposure is 263,536. Therefore, the additional 13,536 (= 263,536 - 250,000) is not covered by the re-insurer (hence the 13,536 is multiplied by 0% in the calculation).

    Let me know if that makes sense.

  • dancas6dancas6

    Thanks Javid! It is clear now.

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