Question

What is a "Surplus Treaty" in pro rata reinsurance?

a.

A treaty exclusively applicable to excess of loss reinsurance

b.

A treaty that defines the amount of each cession as the gross liability exceeding the net liability retention

c.

A treaty that provides indemnity by the reinsurer for loss exceeding a predetermined amount

d.

A treaty for sharing policy liability, premiums, and losses between the reinsured and reinsurer

Answer: (b).A treaty that defines the amount of each cession as the gross liability exceeding the net liability retention Explanation:"Surplus Treaty" can be defined as a term exclusive to pro rata reinsurance treaties. It defines the amount of each cession as the gross (policy) liability that exceeds or is "surplus" to the agreed net liability retention. In other words, it covers the portion of liability that goes beyond the retention limit.

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Q. What is a "Surplus Treaty" in pro rata reinsurance?

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