Question

What is the purpose of arranging an excess of loss reinsurance protection?

a.

To increase premium rates for direct business

b.

To limit the insurer's total aggregate commitment from all underwriting lines

c.

To achieve a wider spread of risks by writing business in many countries across many classes

d.

To stabilize the insurer's profitability

Posted under IC85 Reinsurance Management

Answer: (b).To limit the insurer's total aggregate commitment from all underwriting lines Explanation:By arranging an excess of loss reinsurance protection which operates when claims have occurred under several lines of business as a result of the same event, the insurer can limit his total aggregate commitment from all underwriting lines and protect his net underwriting result.

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