Question

Which of the following is a benefit derived by ceding insurers from a reciprocal exchange of reinsurance treaties?

a.

Ceding insurers are able to secure a profit advantage on the strength of the superior balance of their portfolio.

b.

It does not enable direct insurers to produce a more balanced book of business for themselves and for their treaty reinsurers.

c.

It provides a wider spread for the net retained portfolio of the insurer with an improved balance, thus ensuring greater stability in underwriting surplus.

d.

This arrangement is useful in widely dispersed risks such as in agriculture exposed to pest damage.

Posted under IC85 Reinsurance Management

Answer: (c).It provides a wider spread for the net retained portfolio of the insurer with an improved balance, thus ensuring greater stability in underwriting surplus. Explanation:A reciprocal exchange of reinsurance treaties benefits ceding insurers by providing a wider spread for their net retained portfolio. By engaging in reciprocal reinsurance, insurers can spread their risk across multiple reinsurers, thereby diversifying their portfolio. This diversification leads to an improved balance in the insurer's portfolio, reducing concentration on specific risks and enhancing stability in underwriting surplus. The wider spread of risks helps to mitigate the potential impact of individual losses, as losses from one area or line of business can be offset by gains in others.

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 is a benefit derived by ceding insurers from a reciprocal exchange of reinsurance treaties?
Add Comment

Similar Questions

Explore Relevant Multiple Choice Questions (MCQs)

Q. Which of the following treaty can be placed in weak reinsurance market conditions?

View solution

Q. Which of the following is issued by an intermediary after the issue of cover note?

View solution

Q. Can professional reinsurers provide 100% premium or profit reciprocity?

View solution

Q. What is the role of an intermediary in reciprocal reinsurance negotiations?

View solution

Q. How does market pooling work in the insurance industry?

View solution

Q. What is group underwriting in the insurance industry?

View solution

Q. In which lines of business is reciprocal reinsurance trading more commonly used?

View solution

Q. Why do ceding insurers protect the experience of outward treaty in reciprocal reinsurance trading?

View solution

Q. What is the purpose of involving professional reinsurers and intermediaries in the programme design stage?

View solution

Q. As per market practice, the intermediary issues a cover note to the insurer. Which of the following is not included in it?

View solution

Q. What is the common objective of both direct placements and dealing through intermediaries?

View solution

Q. What is the advantage of using intermediaries in a soft market?

View solution

Q. What is one of the challenges faced by intermediaries in the reinsurance market?

View solution

Q. What is the main difference between direct placements and dealing through intermediaries?

View solution

Q. What is the benefit of good reinsurance arrangements for the insurer?

View solution

Q. What is the importance of keeping the structure of reinsurance arrangements and terms under constant review?

View solution

Q. Why should one exercise caution when examining offers with lower rates from different reinsurers?

View solution

Q. What is the purpose of arranging working covers on a per event basis and dovetailing them into the catastrophe cover?

View solution

Q. What should be considered when selecting a reinsurer for the placement of top surplus?

View solution

Q. What type of reinsurance examination is typically conducted for higher surpluses and facultative reinsurance?

View solution
View All MCQs on IC85 Reinsurance Management

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!

Biology

Dive into the realm of life sciences with our Biology category. Explore the wonders...

Optical Communication

Explore the world of high-speed data transmission with our Optical Communication...

Financial Management and Financial Markets

Master the world of finance with our Financial Management and Financial Markets...

Non Verbal Reasoning

Enhance your cognitive abilities with our Non-Verbal Reasoning category. Dive into...

Surveying

Master the art of land surveying and geomatics with our Surveying category. Explore...

Cell Biology

Delve into the fascinating world of Cell Biology with our specialized category....

Corrosion Engineering

Master the art of preventing material deterioration with our Corrosion Engineering...

Environment Management

Master the art of Environment Management with our specialized category. Explore...

Logical Reasoning

Enhance your logical thinking and decision-making abilities with our Logical...