Chap 3 Question 10 part c
Hi,
In this question, there is a single loss of 150K.
The ratable loss is 100K (due to the incident limit of 100K).
The 50K in excess of the incident limit are already priced for through the excess loss premium.
Therefore, (and this is the question... more of a confirmation than a question): the insurer does pay the full 150K claim, but only adjusts the premium based on the ratable loss. I.e. the insured pays a difference in premium, but does not retain any part of the loss.
Correct?
Comments
Correct, with a retrospective rating plan the insurer pays all losses (the full $150k claim) and then bills the insured for additional premium if the ratable loss amount has increased since the last time the policy was assessed.