Question

How does the spread loss reinsurance contract protect the insurer?

a.

It pays back the negative balance in the insurer's business.

b.

It ensures a fixed term for reinsurance coverage.

c.

It eliminates credit risk for the reinsurer.

d.

It provides additional coverage for catastrophic losses.

Posted under IC85 Reinsurance Management

Answer: (a).It pays back the negative balance in the insurer's business. Explanation:The spread loss reinsurance contract is designed to pay back the negative balance in the insurer's business as pre-agreed with the reinsurer, thus protecting the insurer from such losses.

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