Question

What is one of the most difficult decisions the reinsured has to make in non-proportional reinsurance?

a.

The setting of the retention for the excess of loss cover

b.

The definition of ultimate net loss

c.

The amount of deposit premium to be paid

d.

The choice of reinsurers for different layers

Posted under IC85 Reinsurance Management

Answer: (a).The setting of the retention for the excess of loss cover Explanation:The setting of the retention for the excess of loss cover is one of the most difficult decisions the reinsured has to make in non-proportional reinsurance. The ideal level of retention has been vaguely stated as being low enough as not to be involved in the majority of the claims and yet high enough to keep the insurer from being too greatly exposed in any one loss. The fixing of the retention will also depend on what type of excess of loss cover is required, such as working cover, catastrophe cover, stop loss/aggregate loss, whole account, or umbrella excess of loss. Retention per risk is used to reduce the insurer’s loss in respect of a single risk, and the retention under the excess of loss will be fixed at an amount less than the amount which they accept for their net account on any one risk under proportional reinsurance arrangement.

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Q. What is one of the most difficult decisions the reinsured has to make in non-proportional reinsurance?
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