Question

What is the purpose of drafting a cut-through provision in a specific way in reinsurance agreements?

a.

To ensure payments to the reinsured or a statutory receiver

b.

To limit the liability of the reinsurer in making payments to third parties

c.

To clarify the obligations of the reinsured in a cut-through scenario

d.

To address issues of privity between the reinsurer and the ceding insurer

Posted under IC85 Reinsurance Management

Answer: (b).To limit the liability of the reinsurer in making payments to third parties Explanation:When drafting a cut-through provision in reinsurance agreements, the purpose is often to ensure that when the reinsurer makes payments to a third party, they are not required to make payments to the reinsured or a statutory receiver. This helps to limit the liability of the reinsurer and maintain the intended flow of funds in a cut-through scenario.

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Q. What is the purpose of drafting a cut-through provision in a specific way in reinsurance agreements?
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