Hi,
I have a question on the result section in the sample summary (last paragraph on page 4). The statement is:
"The expected claims under the new policy 7xs3 is $23.0m (undiscounted) so the expected claims size for one additional claim under the new policy is $0.86m which is reasonable compared to an average expectation of $1m. The average expectation is $1m because the additional loss now covered by the new policy must be between $3m and $5m so the payout for ABC Re would average $1m."
I do not really understand why the average expectation is $1m here. Could someone help? Thanks a lot!
I have a question on the result section in the sample summary (last paragraph on page 4). The statement is:
"The expected claims under the new policy 7xs3 is $23.0m (undiscounted) so the expected claims size for one additional claim under the new policy is $0.86m which is reasonable compared to an average expectation of $1m. The average expectation is $1m because the additional loss now covered by the new policy must be between $3m and $5m so the payout for ABC Re would average $1m."
I do not really understand why the average expectation is $1m here. Could someone help? Thanks a lot!