Question

What are the advantages of larger premium reciprocity for the ceding insurer?

a.

Increased reserves and reduced tax on profits

b.

Lower net premium and reduced reserves

c.

Greater tax on profits and larger reserves

d.

Lower brokerage cost and increased profit commission

Posted under IC85 Reinsurance Management

Answer: (a).Increased reserves and reduced tax on profits Explanation:Larger premium reciprocity adds to the net premium of the ceding insurer and has advantages such as the creation of larger reserves and reduction of tax on profits.

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Q. What are the advantages of larger premium reciprocity for the ceding insurer?
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