Question

In the surplus method, who decides the limit of liability which can be retained on any one risk or class of risk?

a.

Policyholder

b.

Intermediary

c.

Ceding insurer

d.

Reinsurer

Posted under IC85 Reinsurance Management

Answer: (c).Ceding insurer Explanation:In the surplus method, the limit of liability which can be retained on any one risk or class of risk is decided by the ceding insurer, who decides how much of the risk to retain and how much to cede to the reinsurer. The ceding insurer retains a certain percentage of the risk, known as the retention, and cedes the remainder to the reinsurer. This percentage can vary depending on the nature of the risk and the ceding insurer's appetite for risk. The reinsurer then assumes a corresponding percentage of the risk, and pays a corresponding percentage of the premium.

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Q. In the surplus method, who decides the limit of liability which can be retained on any one risk or class of risk?
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