Hi, In this part, we are told that we move to a net-net (NN) basis which is net of both reinsurance and AC. The solutions for this part say that this is a better indicator of profit since the net benefit of reinsurance is allowed. How do we know that the NN basis allows for both the negative reinsurance premium and positive recoveries? If instead we wrote a point such as 'the loss ratio would have to be adapted to allow for reinsurance recoveries in the claims incurred' assuming that only reinsurance premiums (and AC) were removed from the premium. Suppose our other advantages/disadvantages were based on this assumption, would they be valid? Many thanks,
Normally when we talk about a net of reinsurance basis it means both premiums and claims are net of reinsurance, so I can't imagine they'd give credit for alternatives.
