Insurance Awareness - Reinsurance
In the context of treaty reinsurance, what does the term 'retention limit' refer to?
In the context of treaty reinsurance, what does the term 'retention limit' refer to?
hard Q10 of 15
Step-by-Step Solution
Step 1: Define retention limit
Retention limit is the maximum amount of risk that the ceding insurer retains on its books before ceding the excess risk to the reinsurer under a treaty.Step 2: Analyze options
The maximum amount the reinsurer will pay for a claim refers to reinsurer's liability limit, not retention. The minimum premium the insurer must pay to the reinsurer is unrelated to retention. The total sum assured of all policies under the treaty is total portfolio sum assured, not retention.Final Answer:
The maximum risk amount the ceding insurer retains before ceding excess to reinsurer → Option DQuick Check:
Retention limit is a key concept in proportional treaty reinsurance like surplus treaties.
Quick Trick: Retention limit = Insurer's maximum retained risk.
Common Mistakes:
MISTAKES- Confusing retention limit with reinsurer's liability or premiums.
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