o.menary11
Active Member
Hi,
in the notes, the following example is given of a layered reinsurance policy:
For example, suppose that layers 400k xs 100k and 1m xs 500k are written by the cedant and a reinsurance contract for 500k xs 500k covers these contracts. If the layers are stacked, then the underlying contract is essentially 1.4m xs 100k and the reinsurance covers the range [600k,1.1m]. If they are independent, the reinsurance only affects the 1m xs 500k contract, covering the range [1m, 1.5m].
I am confused on how the layers have been combined to give a hypothetical 1.4m xs 100k policy (why is the xs 100?). Also, how was the reinsurance cover range [600k,1.1m] been determined?
Thanks
in the notes, the following example is given of a layered reinsurance policy:
For example, suppose that layers 400k xs 100k and 1m xs 500k are written by the cedant and a reinsurance contract for 500k xs 500k covers these contracts. If the layers are stacked, then the underlying contract is essentially 1.4m xs 100k and the reinsurance covers the range [600k,1.1m]. If they are independent, the reinsurance only affects the 1m xs 500k contract, covering the range [1m, 1.5m].
I am confused on how the layers have been combined to give a hypothetical 1.4m xs 100k policy (why is the xs 100?). Also, how was the reinsurance cover range [600k,1.1m] been determined?
Thanks