Does a price floor cause a surplus or shortage.

(4 points) Unknown Reinsurance Company (URC) is renewing two accounts, X and Y, each of which is exposed to two possible independent claim events, I and 2. You are given the following information: Event (D) Loss for Account po X Y 1 1% 20.000 4.000 2 2% 10,000 6.000 p(i) represents the probability of Event /. . The risk load multiplier, 1, is 0.000024. (a) (2 points) Calculate the renewal risk load for each account using the Marginal Variance method. (b) (0.5 points) Demonstrate that the Marginal Variance method is not renewal additive. URC is considering using the Covariance Share method to calculate risk loads. The shared covariance of each event will be allocated to each account in proportion to its loss for that event. (c) (1.5 points) Calculate the risk load for each account using the Covariance Share method