Question

What is one potential danger in accepting large premium reciprocity from a treaty with low average profitability?

a.

Increased tax on profits

b.

Fluctuating profits

c.

Reduction of reserves

d.

Higher net premium ceded

Answer: (b).Fluctuating profits Explanation:Accepting large premium reciprocity from a treaty with low average profitability can subject the profit to wide fluctuations. This indicates that the profitability of such a treaty may not be stable.

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Q. What is one potential danger in accepting large premium reciprocity from a treaty with low average profitability?

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