One of the disadvantage of Surplus reinsurance is:
The insurer is not well protected against large claims from smaller projects.
Can you help me explain this?
As I know, the Surplus reinsurance estimate the Expected Maximum Loss of the risk.
Regardless of the project is small or big, the large claim can be expected from the "EML" therefore the statement seems not true.
Can you explain what's wrong with my thinking?
The insurer is not well protected against large claims from smaller projects.
Can you help me explain this?
As I know, the Surplus reinsurance estimate the Expected Maximum Loss of the risk.
Regardless of the project is small or big, the large claim can be expected from the "EML" therefore the statement seems not true.
Can you explain what's wrong with my thinking?