1. 

   phos2 Member

   For reinsurance and ruin, we have that the insurer's net premium is given by:
   
   \(c_{net} = (1+\theta)E(S) - (1+ \xi)E(S_R)\)
   
   Two questions - Why do we use E(S) rather than E(S_I) for calculating the net premium? I.e. look at the distribution of losses that the insurer pays.
   
   In practice, how is \xi determined? Surely an insurer would not know.
   
   Thanks.

    

   Last edited by a moderator: Sep 12, 2017

   phos2, Sep 2, 2017

   #1
2. 

   John Lee ActEd Tutor Staff Member

   If they only did it on \E(S_I)\) then where would they get the money to pay the reinsurer's premium?

    

   John Lee, Sep 12, 2017

   #2

   wzlee12 likes this.

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