Question

What is the obligation of a reinsurer when the ceding insurer is in financial difficulties or is insolvent?

Reinsurer shares commercial fate, hence reinsurer will have to pay his full share of the same loss

Reinsurer shares insurance fate, hence reinsurer will have to pay his full share of the same loss

Reinsurer shares insurance fate, hence reinsurer will not have to pay his share of the same loss

Reinsurer shares commercial fate, hence reinsurer will not have to pay his full share of the same loss

Posted under IC85 Reinsurance Management

Answer: (b).Reinsurer shares insurance fate, hence reinsurer will have to pay his full share of the same loss Explanation:When a ceding insurer is in financial difficulties or is insolvent, the reinsurer's obligation to pay remains unchanged. Reinsurance is a contract between the insurer and the reinsurer, and the reinsurer assumes a portion of the risk underwritten by the insurer. Therefore, if the insurer becomes insolvent, the reinsurer's obligation to pay is not affected and they will have to pay their full share of the same loss. Reinsurers share the "insurance fate" but not the "commercial fate" of the ceding insurer.

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Q. What is the obligation of a reinsurer when the ceding insurer is in financial difficulties or is insolvent?

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