Class 21 Flashcards
1
Q
reinsurance
A
insurance purchased by primary insurers to transfer risk associated with their insurance business-the transferor is a ceding company; the transferee is a reinsurer
2
Q
what does reinsurance do to net cash flow?
A
increase it if less costly than other forms of capital
3
Q
how does reinsurance increase net cash flow?
A
- create efficient pooling
- lessen the level of positive correlation by sharing in different regions/domain
- split single large valued exposure into multiple exposures
4
Q
reinsurers can add value by…
A
providing services, including evaluation of underlying insurers
5
Q
reinsurance categories
A
proportional or non-proportuinal
6
Q
proportional (20/80)
A
- indicates retention of 20%, ceding of 80%
- 1st retained, 2nd transfered
7
Q
non-proportional
A
reinsurer accepts risk above a retention (similar to deductible-primary pays something, reinsurer pays rest)
8
Q
faculative
A
on a single exposure
9
Q
book of business
A
treaty-sometimes called obligatory (all strip malls of a certain size)
