Insurance Awareness - Reinsurance
Which of the following statements about treaty reinsurance is CORRECT?
Which of the following statements about treaty reinsurance is CORRECT?
hard Q10 of 15
Step-by-Step Solution
Step 1: Understand treaty reinsurance
Treaty reinsurance is an agreement where the reinsurer automatically covers all risks in a specified portfolio without individual acceptance.Step 2: Analyze options
It requires individual acceptance of each risk by the reinsurer describes facultative reinsurance, not treaty. It provides automatic coverage for all risks within the agreed portfolio correctly states treaty reinsurance provides automatic coverage. It is only applicable to life insurance policies is false; treaty reinsurance applies to both life and general insurance. It eliminates the need for the ceding company to pay premiums is incorrect; the ceding company pays premiums to the reinsurer.Final Answer:
It provides automatic coverage for all risks within the agreed portfolio → Option DQuick Check:
Treaty reinsurance covers portfolios automatically, unlike facultative which is selective.
Quick Trick: Treaty = Automatic portfolio coverage.
Common Mistakes:
MISTAKES- Confusing treaty with facultative reinsurance or misunderstanding premium payments.
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