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Q&A Bank Part 6.4 (iii) - ???

1

12345

Member
Hi,

One of the lines in the "Cost versus Benefit" section has thrown me - for a specific large loss it states that "The reinsurer was lucky in that nine lines of the surplus treaty were used" but is that right?

As I understand it EML = (1 + number of lines used) x retention

So, the more lines used, the less retention for the insurer and the more exposure passed to the reinsurer?

Is this just a typo and it should read "the insurer was lucky.."?

Thanks in advance
 
Hi, yes I think you're right in that it's the insurer who was lucky rather than the reinsurer.

Well spotted - we'll change this in the solutions.

Coralie
 
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