The booklet states that claim volatility for insurer decreases if retention increases. Wouldn't claim volatility increase with increase in retention? Therefore with higher retention limit won t the probability of ruin increase for the insurer? Please clarify!
Hi Adithyan I agree with you on this one, I think it's a typo, should be: - the higher the insurer's retention limit - the higher the insurer's claims volatility, and - the lower the reduction in the probability of ruin. or: - the lower the insurer's retention limit - the lower the insurer's claims volatility, and - the greater the reduction in the probability of ruin. I will flag this to be added to our Corrections doc. Anna