[Solved] Which of the following best describes proportional reinsurance? — Ans: The reinsurer shares premiums and losses in agreed proportions. | Insurance Awareness

Insurance Awareness - Reinsurance

Which of the following best describes proportional reinsurance?

AThe reinsurer shares premiums and losses in agreed proportions.

BThe reinsurer pays claims only if losses exceed a specified amount.

CThe reinsurer covers losses without sharing any premiums.

DThe reinsurer pays a fixed amount regardless of the loss size.

Step-by-Step Solution

Step 1: Understand proportional reinsurance
Proportional reinsurance involves the reinsurer receiving a fixed percentage of the premiums and paying the same percentage of claims.
Final Answer:
The reinsurer shares premiums and losses in agreed proportions. → Option A
Quick Check:
[Proportional reinsurance] = Shares premiums and losses in agreed proportions ✅

Quick Trick: Remember 'Proportional = Proportionate sharing of premiums and losses'.

Common Mistakes:

MISTAKES

Confusing proportional with non-proportional where payment depends on loss exceeding a threshold.

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Which of the following best describes proportional reinsurance?