Question

What is the primary advantage of using a flat rate of commission for reinsurance accounting?

a.

Easy calculation and accounting

b.

Reflects the loss ratio of the treaty

c.

Provides flexibility for different types of business

d.

Allows for adjustments based on earned premiums

Posted under IC85 Reinsurance Management

Answer: (a).Easy calculation and accounting Explanation:Using a flat rate of commission for reinsurance accounting has the primary advantage of being easy to calculate and account for. With a fixed percentage applied to the premiums ceded, less returns and cancellations, the commission payable can be determined straightforwardly. This method simplifies the accounting process and ensures consistent commission calculations.

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Q. What is the primary advantage of using a flat rate of commission for reinsurance accounting?
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