Hi, I have a question about 1.27 (ii): "If E remains fixed, fined the expected amount of the loss paid by the insurer if losses are given by... " When I was working this question out, I thought insurer referred to direct writer (ie. not the reinsurer). But the answers seem to refer to the reinsurer as the insurer. Is this sort of wording frequent in the actual exam? (because if it is, I would've gotten it incorrect!)
There isn't a reinsurer in the question! The question is applying the principles of reinsurance to the individual customer and direct insurer. Instead of the reinsurer paying once total claims go over the retention limit, we've got a direct insurer who pays once an individual claim goes over the excess. I'm going through past exams at the moment and haven't seen any questions like this come up so far, but you never know what they might throw at us in there!
err der!! I feel silly now but thanks heaps for resolving my question. I need to start going through past papers soon, eek.
