Question

What happens if the application of the PML excess clause leads to different shares in a loss for the direct insurer and the reinsurer?

a.

The reinsurer retains the entire loss amount

b.

The direct insurer reimburses the reinsurer for the difference

c.

The reinsurer reimburses an appropriate share of the original premium to the direct insurer

d.

The direct insurer and the reinsurer renegotiate their shares in the loss

Posted under IC85 Reinsurance Management

Answer: (c).The reinsurer reimburses an appropriate share of the original premium to the direct insurer Explanation:If the application of the PML excess clause results in the direct insurer and the reinsurer having different shares in a loss compared to what they would have had without the clause, the reinsurer is required to reimburse an appropriate share of the original premium to the direct insurer. This ensures a fair distribution of the financial impact of the loss between the parties involved.

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Q. What happens if the application of the PML excess clause leads to different shares in a loss for the direct insurer and the reinsurer?
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