Insurance Awareness - Reinsurance
In non-proportional reinsurance, the reinsurer’s liability begins only after the insurer’s loss exceeds a certain amount. This amount is called the:
In non-proportional reinsurance, the reinsurer’s liability begins only after the insurer’s loss exceeds a certain amount. This amount is called the:
medium Q5 of 15
Step-by-Step Solution
Step 1: Understand non-proportional reinsurance
In non-proportional reinsurance, the insurer retains losses up to a certain limit; beyond that, the reinsurer pays.Step 2: Define terms
The retention limit is the threshold loss amount retained by the insurer. Sum assured is unrelated here, premium rate is the cost, and ceding commission is a fee paid to the insurer.Final Answer:
Retention limit → Option AQuick Check:
Retention limit is the insurer’s retained loss before reinsurance applies.
Quick Trick: Retention limit = insurer’s loss threshold in non-proportional treaties.
Common Mistakes:
MISTAKES- Confusing retention limit with sum assured or premium.
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