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April 2015 Q4

L

LastHurdles

Member
The solution to this question says that 'there is evidence to suggest that A is using Quota share and B is using non-proportional.'

What is this evidence? In my attempt at this i actually came up with the opposite conclusion that A is using Non-prop and B is using Quota share. This is becuase the larger premiums suggest this. I would normally think that smaller premiums are associated with Non-proportional covers.

But i may be wrong....

Anyone have any thoughts on this?
 
In additiona to my previous question:

There is another comment that says 'A only slightly larger balance sheet than B'

what two numbers are they comparing to determine this?
 
Remember with quota share reinsurance the premiums and claims are shared in the same proportion between the insurer and reinsurer. Therefore you would expect the insurer's gross and net loss ratios to be the same.

You get a similar picture if you compare the percentage reinsured with the percentage recovered for each of A and B.

The relative size of the reinsurance premiums only tells you how much reinsurance they have bought and not what type of reinsurance.

To compare the size of the balance sheets they have looked at the Total Assets (=Total Liabilities).
 
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