• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

ST3 Apr 2009 Q6 (ii)

R

RedCoat

Member
Hello,

This question states that we have Cat XoL RI of "0.5% in excess of 0.05% of the total sum insured for the book at the date of loss". This comes with one free reinstatement.

We have a loss of £33.7m in October, where the sum insured is estimated to be £63.5bn. This gives an attachment of 0.05% * £63.5bn = £31.75m.

I understand up to here in the solution. The solution then says that we therefore recover 33.7 - 31.75 = £1.95m. Based on the wording of the cover, I thought that the limit of our RI would be 1.005 * 31.75m = 31.90875m (i.e. 0.5% in excess of the attachment). Now I understand that this gives a ridiculously small limit for the RI given the attachment, so I must be misunderstanding, but I'd appreciate if anyone could explain why please? Does the 0.5% refer to a LR? Is it 0.5% of the SI in excess of 0.05% of the SI (in which case is this not terrible wording??).

So yeah then in my solution we only recover 31.90875 - 31.75 = £0.15875m. But clearly this is wrong! Any help much appreciated. Thanks!
 
Hello RedCoat,

It is indeed implying '0.5% of the SI in excess of 0.05% of the SI'.
To be honest, my first interpretation of the Qn wording was exactly this, so I wouldn't say it is terrible wording, imo.
 
Back
Top