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Self-test answers vii

Chapter 7 self-test answers

1. Non-proportional reinsurers may assume liability for losses on risks attaching during a specified
period, for losses occurring during a specified period, irrespective of the inception dates of the
original risk or policies, or for losses discovered or claims made during a specified period.
2. According to the usual definition of ultimate net loss (UNL):
• The sum actually paid by the reinsured in settlement of the claim, with the exception of ex gratia
claims, is included.
• Unless specifically excluded, expenses attributable to the claim – such as legal and loss
adjustment expenses – are included.
• Usual office expenses and salaries payable by the reinsured are excluded.
• All recoveries, salvages, subrogations and recoveries under reinsurances which inure to the
benefit of this reinsurance are deducted.
3. A severance of one part of a unit, usually involving a risky component of an account offered for
reinsurance leading to a parallel or secondary treatment and facultative terms applied.
4. A claims control clause allows a reinsurer to appoint adjusters to act on its behalf to control the
investigation, adjustments and settlements in connection with the claim notified by the insured.
5. When a reinsured has incurred losses under more than one policy but arising from the same
occurrence or event, and the policies attach to different excess of loss treaty periods.
6. Loss settlements made by the reinsured are binding upon the reinsurer provided they are within the
terms and conditions of the original policies and within the terms and conditions of the reinsurance
contract. The reinsurer undertakes to pay its share of losses upon reasonable evidence of the
amount paid by the reinsured being given to the reinsurer.
7. The index clause should specify:
• The index to be applied and its value at the base date. Reference copy for CII Face to Face Training
• Whether indexation applies to all claims or to bodily injury claims only.
• Whether an excess or franchise is to apply and, if so, at what percentage.