3 - Reinsurance Flashcards
Why do firms sell reinsurance?
- Access restricted business
- Trialing new classes of business
- Pure business preference
How can an insurer easily access business in another part of the world without opening an office, employing new underwriters or setting up a delegated authority arrangement there?
By writing reinsurance.
What reinsurance clause gives full control of claims to the insurer?
Full Follow Clause
What does the claim cooperation clause determine?
Insurer must advise reinsurer of loss and keep them advised during claims handling process.
If a reinsurer wanted to ensure that they were closely involved with all claims being handled by the insurer, which clause should they put into the contract?
Claims control clause
What reinsurance covers individual, often unusual, risks?
Facultative
In a facultative obligatory contract, on which of the parties is the ‘obligation’?
The Reinsurer.
What type of reinsurance is non-proportional and purchased in layers?
Excess of Loss (XL) Reinsurance.
In the context of insurance, what are ‘reinstatements’?
Triggers to bring policy layers ‘back to life’ after a loss, usually for the payment of additional premium.
What is the combined ratio?
Percentage of premium income represented by claims and operating costs.
What does ‘stop loss reinsurance’ cover?
Covers loss when an insurer’s combined ratio is above 100%
What is the name for the risk the insurer keeps for itself?
Retention
Under proportional reinsurance, what are the two treaties available?
- Quota Share
- Surplus Lines
What is the order by which reinsurance claims are triggered?
Facultative first, then proportional and finally non-proportional.
In a facultative obligatory contract, what choice does the insurer have in respect of ceding the risk?
The insurer can choose which risks to cede.
