Is the 10-10 Rule supposed to net out the RI premium when computing the loss?

bflisakowskibflisakowski
in Freihaut.Reins

The infinite problem generator in BQ2 does not subtract reinsurer premiums when computing the U/W loss, but #25a in BQ3 DOES net out the premiums when computing the loss. Which is the correct approach?

Comments

  • Staff - ACStaff - AC

    2015.S.25a does not net out reins premium. It takes the reinsured portion of loss and compares it to reins premium.

    As it should. 10-10 is a rule for risk transfer to reinsurer.

  • amberxmcamberxmc

    I am confused, please help. Should I subtract RE premium or not? and what's the threshold in S15 #25a?
    my try: (60% * $100M) / $20M =300% >110%, yes to risk transfer

    I refer sample answer from S18 #26a - net loss/RE_prem >110%, yes to risk transfer

  • Staff - ACStaff - AC

    In 2015.S.25a, the potential underwriting loss of the reinsurer is 60% * $100M - $20M. You subtract premium from loss to get underwriting loss.

    The thresholds are 10% for underwriting loss and 10% for the probability of underwriting loss.

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