Delta Insurance is a property insurer that entered into a surplus-share reinsurance treaty with Eversafe Re. Delta has a retention limit of $200,000 on any single building, and up to nine lines of insurance may be ceded to Eversafe Re. A building valued at $1,600,000 is insured with Delta. Shortly after the policy was issued, a severe windstorm caused an $800,000 loss to the building. a. How much of the loss will Delta pay? b. How much of the loss will Eversafe Re pay? ¢. What is the maximum amount of insurance that Delta can write on a single building under the reinsurance agreement? Explain your answer.
Delta Insurance is a property insurer that entered into a surplus-share reinsurance treaty with Eversafe Re. Delta has a retention limit of $200,000 on any single building, and up to nine lines of insurance may be ceded to Eversafe Re. A building valued at $1,600,000 is insured with Delta. Shortly after the policy was issued, a severe windstorm caused an $800,000 loss to the building. a. How much of the loss will Delta pay? b. How much of the loss will Eversafe Re pay? ¢. What is the maximum amount of insurance that Delta can write on a single building under the reinsurance agreement? Explain your answer.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Delta Insurance is a property insurer that entered into a surplus-share reinsurance treaty with Eversafe Re. Delta has a retention limit of $200,000 on any single building, and up to nine lines of insurance may be ceded to Eversafe Re. A building valued at $1,600,000 is insured with Delta. Shortly after the policy was issued, a severe windstorm caused an $800,000 loss to the building. a. How much of the loss will Delta pay? b. How much of the loss will Eversafe Re pay? ¢. What is the maximum amount of insurance that Delta can write on a single building under the reinsurance agreement? Explain your answer.
Transcribed Image Text:Delta Insurance is a property insurer that entered
into a surplus-share reinsurance treaty with Eversafe
Re. Delta has a retention limit of $200,000 on any
single building, and up to nine lines of insurance may
be ceded to Eversafe Re. A building valued at
$1,600,000 is insured with Delta. Shortly after the
policy was issued, a severe windstorm caused an
$800,000 loss to the building.
a. How much of the loss will Delta pay?
b. How much of the loss will Eversafe Re pay?
c. What is the maximum amount of insurance that
Delta can write on a single building under the
reinsurance agreement? Explain your answer.
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