Question

When arranging a surplus treaty agreement in conjunction with a quota share treaty, why is it important to determine whether the surplus treaty is based on net or gross lines?

a.

The difference in monetary limits can be significant.

b.

The ceding insurer may not be able to retain any risks for its own account.

c.

The reinsurer may not be willing to accept inferior risks.

d.

The surplus treaty may be terminated before the end of the treaty period.

Posted under IC85 Reinsurance Management

Answer: (a).The difference in monetary limits can be significant. Explanation:The difference in monetary limits between net and gross lines can be significant, and it is important to determine which method is being used in order to avoid any confusion or misunderstandings.

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Q. When arranging a surplus treaty agreement in conjunction with a quota share treaty, why is it important to determine whether the surplus treaty is based on net or gross lines?
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