Question

Why is it wise to reinsure out on a proportional basis any risks carrying high exposure or risks where the rate level is considered inadequate?

a.

To reduce the risk of accumulation hazard

b.

To save premium equivalent to the loading on the burning cost

c.

To reflect the gross underwriting result in the net results over a period

d.

To protect against catastrophe perils such as hurricane or flood

Posted under IC85 Reinsurance Management

Answer: (c).To reflect the gross underwriting result in the net results over a period Explanation:When the whole account is protected by a working excess of loss cover with a short payback period, the gross underwriting result gets fully reflected in the net results over a period. Hence it is wise to reinsure out on proportional basis any risks carrying high exposure or risks where the rate level is considered inadequate.

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Q. Why is it wise to reinsure out on a proportional basis any risks carrying high exposure or risks where the rate level is considered inadequate?
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