# 2017 Paper 2 Question 7 - Reinsurance Question

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Hi. I am a little bit confused about the way the memo calculates the total reinsurance recovery for this question, particularly the part concerning the individual surplus arrangement. I am hoping if you can just expand on where they're getting the numbers from? (I'll highlight the portion I don't understand)

The question:

My attempt:

My understanding is that the proportion retained under individual surplus is (retention limit)/(EML), which in this case I thought it would be 1mil/2mil = 50%. I am confused as to how they arrive at 16.67% ceded (83.33% retained).

Thanks!

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