Question

How does the retention of the reinsured affect the rate for excess of loss covers?

a.

The lower the retention of the reinsured, the larger the number of claims the reinsurer can expect to exceed it, therefore the higher will be the rate.

b.

The higher the retention of the reinsured, the larger the number of claims the reinsurer can expect to exceed it, therefore the higher will be the rate.

c.

The lower the retention of the reinsured, the smaller the number of claims the reinsurer can expect to exceed it, therefore the higher will be the rate.

d.

The higher the retention of the reinsured, the smaller the number of claims the reinsurer can expect to exceed it, therefore the higher will be the rate.

Posted under IC85 Reinsurance Management

Answer: (a).The lower the retention of the reinsured, the larger the number of claims the reinsurer can expect to exceed it, therefore the higher will be the rate. Explanation:The lower the retention of the reinsured, the larger the number of claims the reinsurer can expect to exceed it, therefore the higher will be the rate for excess of loss covers. The greater the limit to the reinsurer, the greater his exposure and the higher the rate.

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