RIM$3352$ Examination $(22^{ed}$ Term $2023-2024)$

Section II: Short Answer Questions $(60$ marks$)$

Question $1(15$ marks$).$ Reinsurance is an essential tool for primary insurers to transfer and finance risks in their underwriting portfolio. Assume that you are a risk manager for a general insurance company that mainly underwrites the motor insurance business.

$1\mathrm{.}1$ Discuss how would you use proportional and non$-$proportional reinsurance to limit the retained risk in the underwriting portfolio. $(4$ marks$)$

$1\mathrm{.}2$ Discuss the implications of loss recovered from proportional and nonproportional reinsurance. $(6$ marks$)$

$1\mathrm{.}3$ After deciding to use a reinsurance program consisting of both proportional and nonproportional reinsurance contracted with different reinsurance, you need to pay attention to what risk when placing the reinsurance program. How to manage such a risk? $(5$ marks$)$

Question $2(10$ marks$).$ ABC Insurance Company is an established property insurer and has underwritten property insurance related to fire and flood in country A for many years.

$2\mathrm{.}1$ ABC Insurance Company has a treaty reinsurance to cover its property insurance. If ABC Insurance Company needs a large capacity to underwrite policies for large risks in the primary market. At the same time, ABC Insurance Company must limit its net retained loss below a certain threshold $($e$.$g$.,0\mathrm{.}5$ million$)$ for each risk. Recommend proper reinsurance methods to ABC Insurance Company. $(4$ marks$)$

$2\mathrm{.}2$ Recently, ABC Insurance Company plans to expand its business in country A through underwriting casualty insurance which it does not have much experience. Is it a good idea to negotiate with the current treaty reinsurer to cover the new casual insurance under the same treaty reinsurance? Why? $(4$ marks$)$ What would be a proper reinsurance to cover the casualty insurance business of ABC Insurance Company? $(2$ marks$)$