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Self-test answers iii

Chapter 3 self-test answers

1. ‘As original’ is generally meant to cover all aspects of the original policy, including any claims
settlements that follow original settlements made by the original insurance company. However, it is
important that terms are clearly specified in the reinsurance contract wording.
2. Besides buying facultative excess of loss reinsurance for its own protection, the reinsured may
decide it wants to protect the cession made to its proportional treaty reinsurers too.
3. Reasons could range from:
• Requiring additional capacity to assume risks exceeding its existing limits.
• Lacking automatic cover in respect of the particular class of business concerned.
• Not wishing to expose its treaty reinsurers to a contentious or hazardous risk.
• Where certain risks are specifically excluded by the treaty reinsurers.
4. Estimated maximum loss is a calculation with particular relevance to property insurance that is
intended to enable the insurer to calculate the extent of a worst case loss which is potentially less
than the maximum value at risk.
5. Any three from:
• vulnerability of class of risk;
• other commitments on the risk;
• exposures from other nearby risks;
• particularly unattractive features of the risk.

6. The amount of the original premium to be paid to facultative non-proportional (excess of loss)
reinsurers relative to the risk they undertake increases as the excess or deductible decreases. Reference copy for CII Face to Face Training