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

Posted under IC85 Reinsurance Management

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.

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