In Manama, BBK Insurance covered 5,000 commercial spaces for 2019. The company estimates that a there is a 2% chance of loss caused by any peril in the area covered. In addition, per historical data, 80 to 120 buildings experience some form of loss in a year. 

Requirements;

a.What is the expected value of loss?

b.What is the objective risk of the area covered by BBK?

2.Lulu and City Center both own an identical storage building in Sitra valued at BD 10,000. It was estimated that there is a 8 percent chance in any year each storage will be destroyed (loss to either of the building are independent). Both Lulu and City Center agreed to share the risk and agrees to pay equal amount of share in case of a loss.

Requirements;

a.Calculate the expected loss for each of the parties involved.

b.Estimate the objective risk before pooling.

(3 marks for the correct process + 2 marks for the correct answer = 5 marks)

c.Estimate the objective risk as a result of the pooling.

(3 marks for the correct process + 2 marks for the correct answer = 5 marks)

Answer rating: 100% (QA)

a Expected Value of Loss The expected value of loss is the average loss you expect over a long perio... View the full answer