Hi, I have questions in ch2, can someone please help me : 1. p10 : "some clubs also buy their own market reinsurance below the pool attachment point" . is my understanding correct? - clubs pool the losses across the members ( only for the losses above a fixed amount , the fixed amount is derived based on historical experience); - club then retain certain portion (ie attachment point) , rest of the losses are transferred to reinsurance market; then why they buy RI cover below attachment point? 2. page 35 : impact of PPOs on solvency one year . need to consider how to treat the longer term uncertainties , otherwise unable to pass the Use Test. can someone provide a bit more information how the Use Test help to identify the uncertainties in PPOs? thank you very much for your help
1. I'd imagine because their risk tolerance is lower. 2. The Use Test is all about showing that your model (and hence the assumptions within it to allow for uncertainty) is used throughout your company to support management decisions. So having PPOs will just add to that uncertainty, and the company will have to show the regulator how it has allowed for it, in order to satisfy the Use Test.
