Question

What is an "Obligatory Treaty" in reinsurance?

a.

A reinsurance contract that must be accepted by the ceding insurer

b.

A reinsurance contract that allows the ceding insurer to choose whether to cede business

c.

A reinsurance contract that requires the ceding insurer to cede business according to contract terms

d.

A reinsurance contract that only covers specific types of risks

Posted under IC85 Reinsurance Management

Answer: (c).A reinsurance contract that requires the ceding insurer to cede business according to contract terms Explanation:"Obligatory Treaty" can be defined as a reinsurance contract (usually pro rata) in which the ceding insurer must cede the subject matter business according to the terms of the contract and it must be accepted by the reinsurer.

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