Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

problem 1: A reinsurance company prepares a book of catastrophe reinsurance contracts to an expected combined ratio of 60%. This estimates that its aggregate claims distribution is compound Poisson with λ = 20% and the claim size distribution is exponential with mean of $1m.

a) Compute the minimum amount of capital it needs to make sure that its ultimate probability of ruin stays below 0.5%.

b) Ignoring investment income, compute the return on capital that the reinsurer would produce if it held the amount of capital that you computed in (a) above.

c) Propose potential practical limitations of the above solution.

problem 2: A small general insurance company (A) writing only property business cedes a quota share reinsurance arrangement to reinsurance company (B). The treaty cedes 40% of the protected portfolio. A pays 25% commission to get the business and has internal expenses of 7.5%. A expects to prepare £10m of business at a loss ratio of 65%. B bears the ceded proportion of A’s acquisition costs and expenses. B’s own expenses are 2% of gross premium received by B and B pays the broker 2.5% for the business.

a) Compute B’s expected profit on this treaty, stating any suppositions that you make.

b) As a pricing actuary for B you have been shown this treaty by an underpreparer. describe what changes to the treaty you might propose to the underpreparer before the terms are agreed. 

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M96454

Have any Question? 


Related Questions in Basic Finance

In statistics you learn about type i and type ii errors a

In statistics, you learn about Type I and Type II errors. A Type I error occurs when a statistical test rejects a hypothesis when the hypothesis is actually true. A Type II error occurs when a test fails to reject a hypo ...

1 in a transportation firm what types of things will change

1. In a transportation firm, what types of things will change operating revenues? Operating expenses? 2. If a transportation firm shows a rise in revenue per passenger mile, what does this increase imply? 3. How is the p ...

Excel assignment you are going to purchase a new house

Excel Assignment You are going to purchase a new house valued at $250,000 by making the down payment of 20% and borrowing the rest as a 30-year fixed rate mortgage of 5.25%. Solve the problem by creating an Excel spreads ...

1 list four important drivers of housing demand and price

1. List four important drivers of housing demand and price appreciation. 2. What are public goods? How may they be reflected in house prices? 3. When considering an investment in "distressed'' properties, what are the tw ...

Charlie is a currency trader and has in inventory 125000

Charlie is a currency trader and has in inventory 125000 Euros that he purchased for $1.17 per Euro. The Euro is now trading at $1.40. What is Charlie's profit or loss on this currency trade? Place your answer in numbers ...

A national survey of 40000 adults in the us in 1992 found

A national survey of 40,000 adults in the US in 1992 found that 26% of adults were current smokers. A similar survey of 37,000 adults in the US in 1966 found that 43% of adults were current smokers. Construct a 95% confi ...

Briefly describe each of the following disbursement

Briefly describe each of the following disbursement products/methods: a. Zero-balance accounts (ZBAs) b. Controlled disbursement c. Positive pay How does a ZBA relate to the firm's target cash balance?

1 define external validity and indicate its importance to

1. Define external validity, and indicate its importance to scientific progress. 2. Why is it never possible to know whether a research finding will generalize to all populations of individuals? How do behavioral scienti ...

Write 3-5 pages on the implementation of dodd-frank and the

Write 3-5 pages on the implementation of Dodd-Frank and the qualified mortgage rules in Dodd-Frank: specifically, concentrate on how small community banks have been treated relative to other institutions since the onset ...

Theres no real difference between options and futures both

"There's no real difference between options and futures. Both are tools for controlling risk, and both are derivative products. It's just that with options you have to pay an option price, while futures require no upfron ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen