Insurance Awareness - Reinsurance
Which of the following best describes treaty reinsurance?
Which of the following best describes treaty reinsurance?
medium Q4 of 15
Step-by-Step Solution
Step 1: Define treaty reinsurance
Treaty reinsurance involves automatic acceptance of all risks in a portfolio as per a pre-agreed contract.Step 2: Eliminate other options
Reinsurer evaluates and accepts each risk individually describes facultative; Reinsurer pays only when losses exceed a certain threshold describes non-proportional; Reinsurer shares only the profits of the insurer is incorrect as profit sharing alone is not treaty reinsurance.Final Answer:
Reinsurer automatically accepts all risks in a portfolio under a contract → Option DQuick Check:
Treaty means automatic portfolio coverage.
Quick Trick: Treaty = Total portfolio accepted automatically.
Common Mistakes:
MISTAKES- Confusing facultative with treaty reinsurance.
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