Hi all, just wanted to check my understanding on this line " A gross claim as small as £1.25m would result in a net claim of £0.5m if no surplus lines were used, but a claim as high as £13.75m could also result in a net claim of £0.5m if the full 10 lines were used" For the first one, it would be as 1.25*0.4 but is the second one 13.75*0.4-5? Not sure about this as it was indicated that the full 10 lines were used. Thanks for your help!
Net of QS the £13.25m loss becomes 13.25*0.4=£5.5m. If all 10 lines are used of the surplus treaty are used, that means the risk is shared with the surplus reinsurer in the ratio 1:10, so 1/11 of the loss net of QS is therefore retained, ie 5.5/11=£0.5m.
