10

3304 Assignment 10 Project (30 Points)

1. (5 Points) Large contractor has a need for $100,000,000 of completed operations liability

coverage. However, their liability insurance carrier cannot provide this limit of insurance without

reinsurance. These reinsurer options are available to the underwriter. What would be the lowest

combination of insurance and reinsurance that would provide one hundred million dollars in

coverage. This will be per occurrence only, ignoring any aggregates.

Company Limit Premium

Insurer: $1,000,000 $114,000

Reinsurer A: $5,000,000 x of $50,000,000 $13,000

Reinsurer B: $25,000,000 x of $75,000,000 $11,000

Reinsurer C: $5,000,000 x of $1,000,000 $22,000

Reinsurer D: $24,000,000 x of $10,000,000 $14,000

Reinsurer E: $24,000,000x of $1,000,000 $30,000

Reinsurer F: $15,000,000 x of $25,000,000 $12,000

Reinsurer G: $20,000,000x of $50,000,000 $16,000

Reinsurer H: $5,000,000 anywhere x of

$50,000,000 $4,000

Reinsurer I: $10,000,000 anywhere x of

$10,000,000 $7,000

Reinsurer J: $15,000,000 anywhere x of

$10,000,000 $9,000

Reinsurer K: $5,000,000 anywhere x of

$20,000,000 $3,000

Reinsurer L: $9,000,000 anywhere x of

$1,000,000 $14,000

2. (10 Points) Insurer X insures a large number of small property accounts with average

premiums of $1,000. The policies range from a low of $600 to a high of $1,400 premium. Insurer

X wants to grow but is inhibited by statutory surplus requirements. As the reinsurer, what kind of

treaty reinsurance program would you recommend for insurer X and why.

3.(10 Points) Insurer Y has decided to expand its personal lines auto and home insurance

program from the middle west to the southern states, including the gulf coast states. Insurer Y

has good experience with wind claims because of tornados in the middle west. While it expects

similar tornado losses in many of the southern states, it is more concerned with hurricanes. As

Insurer Y’s reinsurer what kind of treaty reinsurance program would you recommend for auto

and home insurance and why.

4. (5 Points) Insurer Z has just been capitalized and is licensed in just one state as a mutual

company. Z will write property insurance in rural areas especially for farmers and their extended

families. While its limits of insurance are small, it wants the capability of providing higher limits

for more substantial farms and homes. As Z’s reinsurer what kind of reinsurance programs

would you recommend and why.