Question 7. XYZ insurance company has a 50% quota share treaty reinsurance with DEF reinsurance company...

 

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Question 7. XYZ insurance company has a 50% quota share treaty reinsurance with DEF reinsurance company incepts 1 January 2019 with a treaty coverage period of 12 months. The premium and valid claims of original policies that are subject to the treaty are summarized in the following table. Inception Date of Original Policy 10 May 25 September 20 December Premium payable of the original policy 240,000 120,000 300,000 This reinsurance treaty is accounted on a clean-cut basis using twenty fourth-basis method. The reinsurer of this treaty will pay a sliding scale commission to the premium ceded to the treaty using the following terms Provisional Commission Minimum commission Sliding 1:1 to Sliding 0.5:1 to a Maximum 25% at 60% loss ratio 20% at 65% loss ratio 30% at 55% loss ratio 40% at 35% loss ratio 7.1 Calculate reinsurance premium ceded to the reinsurance treaty. (10 marks) 7.2 Calculate the reinsurance commission if the loss incurred to the reinsurance treaty is 39,500. (10 marks) Question 7. XYZ insurance company has a 50% quota share treaty reinsurance with DEF reinsurance company incepts 1 January 2019 with a treaty coverage period of 12 months. The premium and valid claims of original policies that are subject to the treaty are summarized in the following table. Inception Date of Original Policy 10 May 25 September 20 December Premium payable of the original policy 240,000 120,000 300,000 This reinsurance treaty is accounted on a clean-cut basis using twenty fourth-basis method. The reinsurer of this treaty will pay a sliding scale commission to the premium ceded to the treaty using the following terms Provisional Commission Minimum commission Sliding 1:1 to Sliding 0.5:1 to a Maximum 25% at 60% loss ratio 20% at 65% loss ratio 30% at 55% loss ratio 40% at 35% loss ratio 7.1 Calculate reinsurance premium ceded to the reinsurance treaty. (10 marks) 7.2 Calculate the reinsurance commission if the loss incurred to the reinsurance treaty is 39,500. (10 marks)

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