Question

What is the situation when a reinsurer is insolvent?

a.

The ceding insurer is fully responsible for the total amount due to the insured.

b.

The reinsurer is responsible for the total amount due to the insured.

c.

The ceding insurer and reinsurer share the responsibility for the total amount due to the insured.

d.

None of the above

Posted under IC85 Reinsurance Management

Answer: (a).The ceding insurer is fully responsible for the total amount due to the insured. Explanation:When a reinsurer is insolvent, the ceding insurer is fully responsible for the total amount due to the insured, irrespective of the fact that he cannot recover the share of the reinsurer or any part of it.

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