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Chapter 11 Casualty reinsurance 11/39

Question answers

11.1 Unlike excess of loss, quota share is an effective substitute for equity capital and guarantees the insurer a
contribution to every qualifying loss.

11.2 Such vehicles are, or should be, the subject of other more specific covers.
11.3 Each sub-class of a motor account has its own characteristics in terms of the anticipated risk profile of
losses, sums insured and limits of indemnity.

11.4 In the event that the policyholder is in a poor state of health, certain conditions may need to be excluded, or
terms of acceptance must provide for a deduction to be made from benefits to take into account pre-existing
illnesses and ailments.
11.5 The different defining characteristics are:
• A working layer is designed to pay losses that occur within an original policy limit of indemnity.
• The lower the retention of the reinsured, the greater is the expectation of losses to the reinsurer.
• A catastrophe layer is concerned with fewer but potentially larger losses.
11.6 Assuming the coverage is set up on a claims made basis, the trigger for the payment of a claim in a given
year is when the insured is first notified of it. In this case, since the grounds for the claim were only
discovered in the early part of 2017 and that is when the claim is made, the claim will be under the 2017
policy.

11.7 Multi-year agreements severely limit the reinsurer’s ability to take early corrective action in the event of a
deteriorating or unacceptable loss experience.
11.8 Possibly, depending on whether the activities of such groups fall within the definition of ‘political violence’.
11.9 Typically the insurer would pay the fair market value of the horse or a specified sum insured, whichever
is less. Reference copy for CII Face to Face Training Chapter

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