Question

3. Ace Insurance Company has a Pro-Rata Surplus Share Treaty for all of their Tavern Owners Policies. Each line is $50,00 and the treaty contains 12 lines, allowing Farm insurance Company the ability to write property limits of up to $600,00.(each line is $50,000). A: As the result of a bar fight, a motorcycle gang does $45,000 in damages to a tavern insured for $500,000. B: A tavern insured for $400,000. Is heavily damaged when a drunken driver smashes his car into the front of the building. The damages total $300,000. 4. Ace needs to find an Excess of Loss Facultative Reinsurance treaty to insure a whiskey manufacturer. The amount of insurance required is $2,000,000. Ace needs to carry the first $500,000. for this single policy. The reinsurer will provide the extra $1,500,000 A. The Whiskey plant has a windstorm loss for $100,000. Who pays for this loss? B. There is an explosion that causes damages of $1,250,000. What is the breakdown for the payments made for this claim?

Answer 1

4 a - Bothe Ace & the reinsurer will have to bear the cost in ratio of 25:75 as the reinsurer is 75% coverge only (1.5 on 2)

4 b -Assuming that entrie 1.25 Mil is loss acceptable for cliam, the breakup of claim payable will be (25:75 ratio)-

Aces - 312,500 ; Reinsurer - 937,500