Hello everyone.. I was wondering if someone could explain me how the calculations are done, regarding the last 3 cases of losses..i think i am a bit confused....
The layer of 2m xs 1m covers losses from 1m up to 3m. Recall reinstatement premiums are due as soon as the original cover is used. The first claim of 2.5m burns through three-quarters of the original cover which gives a recovery of 1.5m and a reinstatement premium due of 180k. The second claim of 5m leads to a recovery of 2m from the layer, which can be thought of as using the remaining 0.5m of the original cover plus 1.5m of the first reinstatement. Recovery is 2m and reinstatement premiums due are 285k. The third claim of 2m leads to a recovery of 1m from the layer, which can be thought of as using the remaining 0.5m of the first reinstatement plus 0.5m of the second reinstatement. Recovery is 1m and reinstatement premiums due are 75k. There are now no further reinstatements available as we are already in to the second reinstatement. There is only 1.5m cover of remaining as we have already used 0.5m from the second reinstatement. The final claim of 8m would have recovered 2m from the layer, but there is only 1.5m of cover remaining so the recovery is limited to this amount.
