Lim M Infinite Calc Problem #2
Hi! For the second Infinite Calc Problem on this section (the one that is not like the Source Text Ch 3 Q13 question), is this just calculating the Insurance Charge for the agg deductible? I expected to need to add the charge for the per-occ deductible to it (E - E(Ad)) like in the Ch3 Q13 question.
Comments
We reviewed the Fisher source material; on page 40 (46 in the PDF), footnote 19 says "If a retro policy also has a per claim loss-limit, the charge for that is sometimes considered part of the insurance charge, and sometimes considered a separate charge. The terminology is not entirely consistent across the industry..."
Since the problem gives a Limited Table M instead of a Table L, in our opinion it's implicit the insurance charge means the charge associated with the aggregate limit only. In the Table L situation the insurance charge explicitly includes k, the charge for the per-occurrence limit/deductible.
On the exam, it's best to show each piece separately and then combine if you have time.
Let us know if you feel it would be helpful for us to make it explicit in the infinite practice problem that we're looking for the aggregate limit/deductible insurance charge.
Yay -inconsistencies in the industry are my favorite lol. Maybe just adding a line in the [Formulas] section (After we click the formulas button on the infinite practice problem) that briefly explains what you said above. I hesitate to vary too much from what you have since it could go either way on the actual problem and we should probably be able to recognize what you said.