Hi I understand that exposure curves Gx cannot go below the diagonal becoz the diagonal already represents total loss. What about risks written on PML or EML basis? How do these apply here, now that the actual loss can be greater than the "sum insured". Thanks.
The x-axis should represent the loss as a proportion of the maximum ie the sum insured not the EML. Otherwise the curve wouldn't give you the 'right' information, as it would suggest that there is no chance of a loss greater than the EML which of course wouldn't be true.
