Page 288 - M97TB9_2018-19_[low-res]_F2F_Neat2

10/20 M97/February 2018 Reinsurance

Question answers

10.1 Marine, aviation and transport and motor vehicle classes are covered under more specific forms of insurance.
10.2 The reinsurer would be liable for its proportion of the claim including the reinsured part of the error, as the risk
is ceded according to the EML.
10.3 So that there is an improved chance of the losses from one risk or area being offset by the profits from
another.

10.4 Without over-generalising too much, a property account would involve mainly short-tail losses.
10.5 The underwriting year basis might involve accounts rendered over a period of perhaps three to five years
making it impossible to arrive at a profit calculation in the short term. That said, it is still possible to adjust
commissions under the scale from the end of the second development year onwards with the final adjustment
being made when all losses have been fully and finally settled.

10.6 If the reinsured chooses a deductible which is too low, more claims will be made to the non-proportional
contract than intended. This might result in the number of reinstatements available being used up and the
reinsurance cover exhausted before the end of the period of reinsurance. It also has an adverse impact on the
reinsurer with the cover generally being insufficiently priced for the risks undertaken.
10.7 It may be faced with the problem of aggregation of risks from a number of reinsureds and therefore needs to
be certain that it does not exceed a prudent exposure in terms of catastrophe cover. This information is also
important when the reinsurer comes to place its retrocession cover.
10.8 To determine whether it already has any commitments for the risk in question and if it has it may reduce its
line on the proposal or decline to give cover.
10.9 Reinsurers usually incorporate an event limit within the contract to avoid having to pay countless losses that
stem from the same occurrence. Reference copy for CII Face to Face Training

10
Chapter