10_10 Practice problems
In the second practice problem the gross losses are shown as 16, why is it not 17 since that is what appears in the chart? Is it because losses are capped by the retention layer? i.egross loss = max(primary retention+excess retention, VAR(0.90))
Comments
Yes. There is a note to this effect at the bottom of page 4 of the document.
For these practice problems. Are we just pretending that there is no pre-determined payment pattern? It seems like if we know exactly when we are going to receive the payment, then there would be no timing risk and so there would be no transfer of risk. Specifically in the battle card 2's pencil problem it says "years after inception to lump sum payment of losses." This seems like a pre-determined payment pattern.
Yes, assume there is no pre-determined payment pattern. It's a less-than-perfect exposition, but it helps to test the application of the 10-10 rule.