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Identifying the Probability of Insolvency for an Insurer Based on Capital Reserves

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Draw a graph of an insurer's probability distribution for total claim costs, assuming that it has expected claim costs of $500 million. Identify the probability of insolvency if the insurer has assets equal to $750 million.

Please use a Bell Curve.

You are supposed to produce a bell shaped curve, depicting the probability and the total claim costs. In the middle of the curve you should the mean. On the right hand side of the curve you should show the area of insolvency.

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Solution Summary

Determining this solution identifies the probability of insolvency for an insurer.

Solution provided by:
Robert Reinhart, MBA
Education
  • MBA, Merage School of Business, Univ of Cal, Irvine
  • BA, Univ of Cal, Irvine
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