IFoA CS2 Practice Questions - IFoA CS2 Risk Modelling And Survival Analysis Exam

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Under excess-of-loss reinsurance with retention M, the reinsurer pays Z = max(X - M, 0). If individual claims X are exponential with mean 1/λ, what is the probability that the reinsurer is involved in a given claim?

1 - e^{-λM} λM e^{-λM} 1 - λM

Correct Answer:

e^{-λM}

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