Question

Which of the following treaty is used mainly for small accounts where the extra administrative burden of a surplus can be quite large?

a.

Surplus treaty

b.

Quota share treaty

c.

Facultative treaty

d.

Excess of loss treaty

Answer: (b).Quota share treaty Explanation:The quota share treaty is used mainly for small accounts where the extra administrative burden of a surplus would be too great. This treaty provides a wider spread for the net retained portfolio of the insurer with an improved balance, ensuring stability in profits. Giant direct insurers cede out a quota share of their retained account against reciprocal reinsurance acceptance from world markets. This implies that the quota share treaty is suitable for smaller accounts and helps in spreading the risk and maintaining balance for the insurer.

Interact with the Community - Share Your Thoughts

Uncertain About the Answer? Seek Clarification Here.

Understand the Explanation? Include it Here.

Q. Which of the following treaty is used mainly for small accounts where the extra administrative burden of a surplus can be quite large?

Similar Questions

Explore Relevant Multiple Choice Questions (MCQs)

Q. Which of the following measures is important for improving the national underwriting capacity and retentions?

Q. What is the primary purpose of participating in pools and ceding on an obligatory basis to national reinsurance organizations?

Q. Which entity is typically the recipient of obligatory cessions in several countries?

Q. How does participation in pools and exchange of reinsurance business benefit smaller insurers in specialized classes of business?

Q. What is one of the challenges faced by insurers when participating in pooling arrangements?

Q. Why do some countries adopt differential commission terms for insurers' cessions to pools?

Q. Why do some countries adopt differential commission terms for insurers' cessions to pools?Why do smaller insurers derive long-term benefits from participating in pools, despite potential sacrifices?

Q. What is the primary reason insurers accept the sacrifice involved in participating in pools?

Q. What is the purpose of group underwriting and retention?

Q. How does the formation of market pools differ from group underwriting?

Q. What is a key benefit of market pools?

Q. When can market pools be particularly effective?

Q. Why is it beneficial to involve professional reinsurers in reinsurance placements?

Q. What is a disadvantage of involving professional reinsurers in the first surplus treaty?

Q. How do professional reinsurers benefit ceding insurers?

Q. Why is it logical to provide professional reinsurers a share in basic treaties?

Q. Which of the following is correct with respect to market pool?

Q. What is the role of an intermediary in the reinsurance placement process?

Q. What is the primary function of an intermediary in reinsurance placement?

Q. What does the intermediary's brokerage cover?

Recommended Subjects

Are you eager to expand your knowledge beyond IC85 Reinsurance Management? We've handpicked a range of related categories that you might find intriguing.

Click on the categories below to discover a wealth of MCQs and enrich your understanding of various subjects. Happy exploring!