Question

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?

To discourage insurers from participating in pooling arrangementsThey receive higher commission rates for their cessions

To ensure a reasonable balance between profit ceded and receivedThey gain access to more profitable portfolios

To incentivize insurers with more profitable portfoliosThey are exempted from ceding business to the pool

To maximize the profitability of the poolThey contribute to the larger national interest

Posted under IC85 Reinsurance Management

Answer: To ensure a reasonable balance between profit ceded and receivedThey contribute to the larger national interest Explanation:In some countries, insurers have differential commission terms for their cessions to pools to maintain a reasonable balance between the profit ceded and the profit received over time. This approach aims to address the disparity in profitability between insurers' portfolios and the pooled business. Therefore, option b) is the correct answer.Participation in pools for companies with more profitable portfolios involves some sacrifice, which is considered worthwhile in the larger national interest. This suggests that smaller insurers derive long-term benefits from participating in pools by contributing to the overall development and improvement of the national reinsurance market. Therefore, option d is the correct answer.

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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...

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