Question

What is a "line" in a surplus treaty?What happens if the ceding insurer decides to retain only Rs. 3,00,000 for a particular risk under a surplus treaty?

The amount of premium paid by the ceding insurerThe amount ceded to the treaty for that particular risk cannot exceed Rs. 30,00,000

The number of risks covered by the treatyThe ceding insurer must bear the balance for his own account

The amount ceded to the surplus treaty equal to the ceding insurer's retentionThe reinsurer is required to pay the difference between the retention and the sum insured

The amount ceded to the surplus treaty in excess of the ceding insurer's retentionThe ceding insurer must affect further reinsurance facultatively for that particular risk

Posted under IC85 Reinsurance Management

Answer: The amount ceded to the surplus treaty equal to the ceding insurer's retentionThe amount ceded to the treaty for that particular risk cannot exceed Rs. 30,00,000 Explanation:In a surplus treaty, a "line" is equal to the ceding insurer's retention. For example, if a ceding insurer has a ten line surplus treaty on the basis of a maximum retention of Rs. 5,00,000, the capacity of the treaty to absorb liability over and above the retention would be Rs. 50,00,000 (10 x Rs. 5,00,000), and the ceding insurer would have automatic protection for policies having sums insured up to Rs. 55,00,000.If the ceding insurer decides to retain only Rs. 3,00,000 for a particular risk under a surplus treaty, the amount ceded to the treaty for that particular risk cannot exceed Rs. 30,00,000 (being 10 x Rs. 3,00,000).

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Q. What is a "line" in a surplus treaty?What happens if the ceding insurer decides to retain only Rs. 3,00,000 for a particular risk under a surplus treaty?

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