QUESTION 17

The appropriate Risk Management technique when the loss of frequency is high and loss of severity is low is :

A.

Retention

B.

Transfer

C.

Loss prevention and retention

D.

Avoidance

2 points

QUESTION 18

Using Sharing Losses method under a surplus-share treaty (Pro rata method), assume that Apex Fire Insurance has a retention limit of $200,000 (called a line) for a single policy, and that four lines, or $800,000, are ceded to Geneva Re. Assume that a $500,000 property insurance policy is issued. Apex Fire takes the first $200,000 of insurance, or two-fifths, and Geneva Re takes the remaining $300,000, or three-fifths. If a $8000 loss occurred therefore the loss will be shared between them as follows:

A.

Apex Fire 3000 / Geneva Re 2000

B.

Apex Fire 2000 / Geneva Re 3000

C.

Apex Fire 3200 / Geneva Re 4800

D.

Apex Fire 2500 / Geneva Re 2500