This is taken from the 2015 paper 1 Q1: The question does the calculation for iii) using the maximum retention limit for the individual surplus. It then uses the minimum retention limit to calculate the maximum possible reinsurance amount for iv (I left out the table because it did not fit).
ARM Exam 1 - 2015.docx (50 kb)
ARM Exam 1 Sch - 2015.docx (78 kb)
PropSure has set up reinsurance treaties which operate in the order given below:
25% Quota Share treaty with Reinsurer A.
Individual Surplus with Reinsurer B, which has a maximum retention limit of $50m and which stipulates that PropSure must retain at least $10m on each risk reinsured
Individual Risk Excess of Loss with Reinsurer C, providing cover of $5m in excess of $2m
(iii) Determine the amounts (a) – (e) in the above table.
(iv) Derive, and simplify, an expression for the maximum recovery (from an individual claim of L on a policy with sum insured S) which could be made from the proportional treaties, in terms of L and S.