Question

What is the purpose of a profit commission?

a.

To increase the reinsurance premium paid by the ceding insurer

b.

To return a percentage of the profits of the treaty for the treaty year to the ceding insurer

c.

To reduce the ceding commission paid by the ceding insurer

d.

To decrease the level of surplus in the surplus treaty

Posted under IC85 Reinsurance Management

Answer: (b).To return a percentage of the profits of the treaty for the treaty year to the ceding insurer Explanation:The purpose of a profit commission is to return a percentage of the profits of the treaty for the treaty year to the ceding insurer. If the results under a treaty are profitable, the reinsurer may agree a further commission called a profit commission.

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