Question

What is the purpose of Risk Excess of Loss reinsurance?

a.

To limit losses that arise on the reinsured’s day-to-day operations

b.

To provide protection against number of losses that arise out of a single accident, occurrence or event

c.

To protect a reinsured against an accumulation or aggregation of losses arising from an identified event

d.

To provide protection against adverse underwriting results of proportional treaties

Posted under IC85 Reinsurance Management

Answer: (d).To provide protection against adverse underwriting results of proportional treaties Explanation:Risk Excess of Loss reinsurance provides protection against adverse underwriting results of proportional treaties and resultant shrinkage of proportional reinsurance capacities. It may force the reinsured to increase per risk retention levels, beyond what their financial strength may justify. Under such situations, the “Per Risk” Excess of Loss provides protection for the increased retention levels. This form of reinsurance is mainly used in protecting property risks loss exposures.

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