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17. The aggregate annual claims S is modeled by a compound Poisson dis- tribution where A = 100 and the typical claim X is lognormal with E(X) = 104 and Var(X) = 3.108. Proportional reinsurance is available at a cost of 1.3 per unit of coverage, and the baseline security loading is 0 0.2. Determine the maximum value of a which should be considered in order to be 98% confident that reserves of 200,000 plus net premiums meet claims for the baseline insurance company. For this value of a, what is the probability that the net premiums of the reinsurer will meet its claims?

17. The aggregate annual claims S is modeled by a compound Poisson dis- tribution where A = 100 and the typical claim X is lognormal with E(X) = 104 and Var(X) = 3.108. Proportional reinsurance is available at a cost of 1.3 per unit of coverage, and the baseline security loading is 0 0.2. Determine the maximum value of a which should be considered in order to be 98% confident that reserves of 200,000 plus net premiums meet claims for the baseline insurance company. For this value of a, what is the probability that the net premiums of the reinsurer will meet its claims?

A First Course in Probability (10th Edition)
A First Course in Probability (10th Edition)
10th Edition
ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
Chapter1: Combinatorial Analysis
Section: Chapter Questions
Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...
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17. The aggregate annual claims S is modeled by a compound Poisson dis- tribution where A = 100 and the typical claim X is lognormal with E(X) = 104 and Var(X) = 3.108. Proportional reinsurance is available at a cost of 1.3 per unit of coverage, and the baseline security loading is 0 0.2. Determine the maximum value of a which should be considered in order to be 98% confident that reserves of 200,000 plus net premiums meet claims for the baseline insurance company. For this value of a, what is the probability that the net premiums of the reinsurer will meet its claims?
Transcribed Image Text:17. The aggregate annual claims S is modeled by a compound Poisson dis- tribution where A = 100 and the typical claim X is lognormal with E(X) = 104 and Var(X) = 3.108. Proportional reinsurance is available at a cost of 1.3 per unit of coverage, and the baseline security loading is 0 0.2. Determine the maximum value of a which should be considered in order to be 98% confident that reserves of 200,000 plus net premiums meet claims for the baseline insurance company. For this value of a, what is the probability that the net premiums of the reinsurer will meet its claims?
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