Question

Why is the portfolio transfer method not always used for valuing portfolios?

a.

It involves considerable expense and work for the ceding insurer

b.

It leads to inaccuracies in the calculation of pro-rata premiums

c.

It requires additional calculations for reinsurance commission

d.

It is not applicable to surplus and quota share treaties

Answer: (a).It involves considerable expense and work for the ceding insurer Explanation:The portfolio transfer method is not always used because it involves considerable expense and work for the ceding insurer due to the large number of cessions under a treaty.

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Q. Why is the portfolio transfer method not always used for valuing portfolios?

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