Question

Which of the following is correct with regards to catastrophe cover?

a.

It protects the insurer against known accumulations arising out of one event.

b.

At least one risk has to be involved in a single loss before the excess of loss is affected.

c.

The retention is normally more than the amount retained under each individual risk.

d.

The retention is normally less than the amount retained under each individual risk.

Posted under IC85 Reinsurance Management

Answer: (c).The retention is normally more than the amount retained under each individual risk. Explanation:Catastrophe cover is a type of non-proportional reinsurance that protects an insurer against a large number of losses arising from a single catastrophic event such as a hurricane, earthquake, or flood. The retention for catastrophe cover is typically higher than the retention for each individual risk because the reinsurer is assuming the risk of a large number of losses that could occur in a single catastrophic event. The excess of loss cover is triggered once the losses from the catastrophic event exceed the retention. Option a is incorrect because catastrophe cover protects against unknown accumulations arising out of a single event. Option b is incorrect because excess of loss cover is triggered when losses from a single catastrophic event exceed the retention, and it is not necessary for more than one risk to be involved in a single loss. Option d is incorrect because the retention for catastrophe cover is typically higher than the retention for each individual risk.

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Q. Which of the following is correct with regards to catastrophe cover?
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