Question

What is a second surplus treaty?

An agreement between the ceding insurer and reinsurer to accept risks

A treaty that covers policies where the sums insured exceed the limits of the first treaty

A treaty that provides coverage for risks that are not covered by the first treaty

A treaty that is signed with a different reinsurer to provide additional protection

Posted under IC85 Reinsurance Management

Answer: (b).A treaty that covers policies where the sums insured exceed the limits of the first treaty Explanation:A second surplus treaty is a treaty that covers policies where the sums insured exceed the limits of the first treaty. When a ceding insurer has policies where the sums insured exceed the limits of the treaty, he has the option of either bearing the balance for his own account (in addition to its existing retention) or affecting further reinsurance either i. Facultatively: each risk individually or ii. By a further additional surplus treaty: automatic reinsurance.

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