Question

Which of the following reinsurance commission method is used to calculate the rate of commission based on the loss ratio of the treaty during any one treaty year or during any one underwriting year?____________ is an additional percentage payable to a ceding insurer on profitable treaties in accordance with an agreed formula.

a.

Flat rate of commissionOverriding commission

b.

Sliding Scale of commissionBrokerage

c.

Overriding commissionProfit commission

d.

Profit commissionFlat rate commission

Posted under IC85 Reinsurance Management

Answer: Sliding Scale of commissionProfit commission Explanation:The sliding scale of commission is a reinsurance commission method used to calculate the rate of commission based on the loss ratio of the treaty during any one treaty year or during any one underwriting year. This means that the commission rate varies or slides based on the performance of the treaty, specifically its loss ratio. As the loss ratio increases or decreases, the commission rate is adjusted accordingly.Profit commission is an additional percentage payable to a ceding insurer on profitable treaties in accordance with an agreed formula. Profit commission serves as an incentive for ceding insurers to produce profitable business. When the treaty results in a profit, the ceding insurer receives an additional commission based on a predetermined formula or agreement. This encourages the ceding insurer to actively pursue and maintain profitable reinsurance treaties.

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Q. Which of the following reinsurance commission method is used to calculate the rate of commission based on the loss ratio of the treaty during any one treaty year or during any one...
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