Question

When is a cut-through clause typically triggered in reinsurance agreements?

a.

When the ceding insurer has an insufficient credit rating

b.

When the reinsurer is not licensed in a particular country

c.

When the reinsurer makes payments to a third party

d.

When the direct insured defaults in payment or becomes insolvent

Posted under IC85 Reinsurance Management

Answer: (d).When the direct insured defaults in payment or becomes insolvent Explanation:A cut-through clause in reinsurance agreements is typically triggered when the direct insured (ceding insurer) defaults in payment, becomes insolvent, or when a liquidation or rehabilitation order is entered. These events indicate a time of financial distress for the ceding insurer, and the cut-through provision allows the underlying insured to access the reinsurer's security and coverage directly.

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Q. When is a cut-through clause typically triggered in reinsurance agreements?
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