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Chapter 11 Casualty reinsurance 11/9

B4D Accumulations
In MOD insurance, accumulation risks occur especially as a result of natural hazards such as
Risk of accumulation
earthquakes, windstorms, floods and hail. The risk of accumulation losses in MTPL, on the other hand, losses in MTPL plays
plays a less significant role. Accumulation losses from natural perils can be defined in the treaty by a less significant role
means of the hours clause.

B5 Types of reinsurance purchased

Facultative
Motor liability, MOD and passenger accident can all be reinsured facultatively. However, interest in the
facultative sector is very small and is generally only for risks that are excluded from treaties on account
of their quality, such as dangerous goods or airport vehicles, or where vehicle values or limits of
indemnity exceed treaty limits.

Question 11.3
Why is it that MTPL, MOD and motor personal accident policies tend to be reinsured under separate treaties?

Treaty
Nevertheless, MTPL/MOD risks can in principle be covered by means of a quota share treaty, provided
sufficient information is available on the portfolio and the primary insurer’s financial background. In
cases where the business is entirely new, comparative figures for the market involved would need to be
used. In addition to quota share treaties, the risk of major losses can also be covered by means of
excess of loss covers. The risk of major losses by natural hazards in respect of MOD is covered by a
catastrophe excess of loss.
In view of the extensive and widely disparate requirements for quota share reinsurance, the most
common form of reinsurance cover for motor is excess of loss. Excess of loss covers are generally rated
using burning cost rating programmes.
In motor personal accident insurance, where reinsured separately, quota share reinsurance can be Reference copy for CII Face to Face Training
supplemented or replaced with surplus reinsurance. From time to time, motor personal accident
insurance is also covered under general personal accident treaties.

C Personal accident

Personal accident insurance provides protection against the economic consequences, usually in the
Provides protection
form of loss of earnings, of accidents. Unlike workers’ compensation insurance that is obligatory in against the economic
many countries, the cover provided under personal accident insurance applies not only to accidents at consequences of
accidents
work but worldwide for accidents of any kind whether at home, while travelling, during leisure time,
during sports activities, and in road traffic. This is known as 24-hour cover. Any of the elements of cover
mentioned can be catered for in isolation or alongside 24-hour cover. Personal accident insurance is
offered to individuals or to groups of employees in one policy.

C1 Extent of cover and exclusions
Personal accident insurance generally covers the following types of benefits. In the event of injury
caused by an accident, all or part of a sum fixed at the time the policy is arranged is paid out on a
fixed-sum basis. Chapter

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