Question

What modifications may be made to the schedule of retentions for cases where more than one risk can readily be affected by one event?What is PML?

a.

Scaling down by a percentage the normal retentionPotential maximum loss

b.

Fixing aggregate limits area-wiseProbable maximum loss

c.

Both a and bPremium maximum loss

d.

None of the abovePresent maximum loss

Posted under IC85 Reinsurance Management

Answer: Both a and bProbable maximum loss Explanation:The modification may either be in the form of scaling down by a percentage the normal retention or by fixing aggregate limits area-wise.Gradually the practice has grown of expressing the retentions and reinsurance cessions in terms of PML (Probable Maximum Loss).

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Q. What modifications may be made to the schedule of retentions for cases where more than one risk can readily be affected by one event?What is PML?
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