Question

Why are catastrophe covers unsuitable for the burning cost method of rating?

a.

They are remote enough not to be affected in any normal year

b.

They are affected in any normal year

c.

They involve too much risk for the reinsurer

d.

They do not provide any income for the reinsurer

Posted under IC85 Reinsurance Management

Answer: (a).They are remote enough not to be affected in any normal year Explanation:Because catastrophe covers should be remote enough not to be affected in any normal year, they are completely unsuitable for the burning cost method of rating.

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Q. Why are catastrophe covers unsuitable for the burning cost method of rating?
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