Pro Rata

Question 1

Fac vs Treaty

Answer 1

Fac (15% of premiums) used on individual risks, way to provide higher limits, one-off contracts, involve the reinsurer immediately before the primary contract is sold so can pass on the cost to the insured

Treaty (85%) cornerstone of reinsurance, blanket rate, cannot pass on costs to insureds

Question 2

Five Functions of Reinsurance

Answer 2

1. Increasing premium volume or leverage
2. Increase primary policy limit
3. Stabilization of net results
4. Increase PHS
5. CAT protection

Question 3

Quota Share Characteristics

Answer 3

Pre-determined, fixed percentage

Primary policy limit determines what primary policies can be ceded ($1M max limit, a 1.2M last 200k is not ceded)

1st dollar recovery, loss ratio does not change