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Homework Assignment 25:
(1) Using the table on page 449, calculate the expected value of the reinsurer’s payment for each of the
following reinsurance arrangements:
(a)
The reinsurer pays 50% of aggregate claims in excess of 2.
The maximum amount the reinsurer
will pay is 2.
(Ans 0.3215)
(b) The reinsurer reimburses aggregate claims at the rate of 80% of the first 2 in excess of 2, 90% of
the next 2, and 100% thereafter.
(Ans 0.5534)
(2) Consider a surplus process where (i) the aggregate claims process, S(t), is compound Poisson with
λ
= 25 and claims have an exponential distribution with mean =10, (ii) the relative security
loading is 25%, and (iii)
proportional reinsurance, h(x) = .30x,
is available at a price 140% of the
expected reinsured claims.
(a) What is the expected gain of the insurer in the absence of reinsurance?
(62.50)
(b) What is it with reinsurance?
(32.50)
a
(c) What is the insurer’s relative security loading with reinsurance?
(0.1857)
b
(d) What is the adjustment coefficient in the absence of reinsurance?
(0.02)
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This note was uploaded on 05/11/2011 for the course STOR 472 taught by Professor Charlesdann during the Spring '11 term at University of North Carolina School of the Arts.
 Spring '11
 CharlesDann

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