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April 2021

A

AKS01

Very Active Member
Hi,

In the solution for Q2 (ii), it states that they might include in the quotation the percentage retained, but this is unlikely for PMI cover if it is on an indemnity basis. Why is this?
 
AKS01 said:
Hi,

In the solution for Q2 (ii), it states that they might include in the quotation the percentage retained, but this is unlikely for PMI cover if it is on an indemnity basis. Why is this?
Click to expand...
Hi

I agree that the examiners report isn't very clear here.

PMI could use quota share on original terms. If it did, then the percentage retained should be in the quotation.

But as the contract is indemnity, some claims could be very large. Quota share wouldn't help with these large claims, so perhaps isn't the most likely type of reinsurance to use. This leads into the next line in the solution that says that the retention level for excess of loss would be quoted.

I hope this helps to clarify the point.

Best wishes

Mark
 
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