Question

What is the difference between retention per risk and retention per event?

a.

Retention per risk is used for catastrophe cover, while retention per event is used for working cover.

b.

Retention per risk is fixed at an amount less than the amount which is accepted for the net account on any one risk under proportional reinsurance arrangement, while retention per event is normally more than the amount retained under each individual risk.

c.

Retention per risk is for unknown accumulations arising out of one event, while retention per event is used to reduce the insurer's loss in respect of a single risk.

d.

None of the above.

Posted under IC85 Reinsurance Management

Answer: (b).Retention per risk is fixed at an amount less than the amount which is accepted for the net account on any one risk under proportional reinsurance arrangement, while retention per event is normally more than the amount retained under each individual risk. Explanation:Retention per risk is used to reduce the insurer's loss in respect of a single risk, while retention per event is used for catastrophe cover to protect the insurer against unknown accumulations arising out of one event. The retention under this type of excess of loss is normally more than the amount retained under each individual risk.

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