Question

What is the reason behind progressively reducing commission terms for cessions at higher level surpluses?

a.

To incentivize ceding insurers to maintain balanced treaties

b.

To allow reinsurers to build up funds to cover adverse years

c.

To discourage ceding insurers from seeking higher level surpluses

d.

None of the above

Answer: (b).To allow reinsurers to build up funds to cover adverse years Explanation:The logic behind progressively reducing commission terms is to allow reinsurers to build up funds to pay for adverse years caused by treaty imbalances.

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Q. What is the reason behind progressively reducing commission terms for cessions at higher level surpluses?

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