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Figure 4.2: Surplus reinsurance risk allocation
Original 6,000,000 Reinsurer’s share
sum insured
Insurer retention
5,000,000
4,000,000
3,000,000
2,000,000
4
Chapter 1,000,000
0
1 2 3 4 5
Risk
If a claim of £500,000 occurred, the insurer and reinsurers would share the loss proportionately to the
risk they undertook, as illustrated in table 4.5.
Table 4.5: Share of loss Reference copy for CII Face to Face Training
Claim Original sum insured Company retains % Cedes to surplus % Claim recovery from
surplus reinsurers
500,000 1,000,000 (100%) Nil Nil
500,000 2,500,000 (40%) (60%) 300,000 (60%)
500,000 3,200,000 (31.25%) (68.75%) 343,750 (68.75%)
500,000 4,000,000 (25%) (75%) 375,000 (75%)
500,000 5,000,000 (20%) (80%) 400,000 (80%)
