Question: Claims from a portfolio are believed to have a Pareto (a,A) distribution. In Year 0, a=6 and 2=1,000. An excess of loss reinsurance arrangement

Claims from a portfolio are believed to have a Pareto (a,A) distribution. In Year 0, a=6 and 2=1,000. An excess of loss reinsurance arrangement is in force, with a retention limit of 500. Inflation is a constant 10% pa. (i) Find the distribution of the insurer's claim payments in Years 1 and 2 before reinsurance. (ii) Find the percentage increase in the insurer's mean net claims payout in each year.

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