Insurance Awareness - Reinsurance
In treaty reinsurance, which of the following best describes the nature of risk acceptance by the reinsurer?
In treaty reinsurance, which of the following best describes the nature of risk acceptance by the reinsurer?
easy Q1 of 15
Step-by-Step Solution
Step 1: Understand treaty reinsurance acceptance
Treaty reinsurance involves a standing agreement where the reinsurer automatically accepts all risks within a defined portfolio without individual underwriting.Step 2: Analyze options
Selective acceptance of risks after individual assessment describes facultative reinsurance, which is risk-by-risk. Acceptance only of risks exceeding a specified loss threshold refers to non-proportional treaties but does not define treaty acceptance. Acceptance limited to facultative contracts is incorrect as facultative is separate from treaty.Final Answer:
Automatic acceptance of all risks within the agreed portfolio → Option BQuick Check:
Treaty reinsurance is characterized by automatic coverage of a portfolio, distinguishing it from facultative reinsurance.
Quick Trick: Treaty = Automatic acceptance of portfolio risks.
Common Mistakes:
MISTAKES- Confusing treaty with facultative reinsurance which requires individual risk approval.
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