Page 161 - M97TB9_2018-19_[low-res]_F2F_Neat2

Chapter 6 Reinsurance programmes 6/29

Question answers

6.1 In the case of long-tail business, it may be many years before the liabilities of the business have been
discharged. Therefore, the durability and commitment of the reinsurer are critical.

6.2 By applying event limits or cession limits to control catastrophe potential and loss corridors or loss
participation restrictions to make the insurer bear some of the ceded losses.
6.3 Its liability in respect of any one hull; the risk of multi-aircraft collision; cargo; passenger and other third-party
liabilities; personal accident covers.
6.4 If there are a number of special acceptances, these would be risks outside the normal ambit of the treaty and
hence their acceptance may lead to an unbalancing of the homogeneous product: this would have to be
factored into the loading. Also, constant consideration of risks outside the normal range of the treaty adds to
reinsurers’ administration costs.
6.5 It would offer a good indication whether the company’s attitude to growth is aggressive or conservative, and
point to the quality of the underlying risks and adequacy of the rating.
6.6 Loss reserves clause, off-set clause and/or termination clause.

6.7 The evidence of cover document also sets out the names of the reinsurers that have accepted the risk and the
amount of their participation.
6.8 Strict reciprocity is the agreement to offer a specified volume of business in return for the receipt of a
comparable volume of premium from a similar portfolio. Loose reciprocity applies where a general broad
account of reinsurance business is offered in a two-way flow of business between two insurers.

6.9 Business of a relatively straightforward type capable of producing stable results such as well-balanced quota
share and first surplus treaties that show a high ratio of premium income to possible maximum loss. No
undue exposure to catastrophe risks. Reference copy for CII Face to Face Training Chapter

6