What is the probability that the first claim

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Question - Danny works for an insurance company that currently - has a portfolio of 200 home insurance contracts in the region of Lloyd. Danny has been asked to undertake a risk analysis of the home insurance portfolio. By looking at home insurance portfolios from other regions, he assumes that the number of claims follows a Poisson process with an average of 6 claims per year.

a) What is the probability that the first claim from this portfolio does not happen within six months? Clearly state what distribution(s) you are using and show all relevant calculation steps.

b) Danny's boss is worried about the company going bankrupt. He says that if the company receives 40 or more claims from this portfolio within the next 5 years they won't be able to afford it. Under Danny's model, what is the probability that this occurs? Clearly state what distribution(s) you are using and show all relevant calculation steps.

Reference no: EM132958163

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