Page 165 - Fire Insurance Ebook IC 57

The Insurance Times

n This treaty called a 'first surplus treaty' may be supplemented by
a 'second surplus treaty' to absorb the amounts which are beyond
the capacity of the 'first surplus' treaty.

The salient provisions generally found in a surplus treaty
are as follows:-

a) The scope of the treaty is defined with reference to the number of
lines, the geographical area and the class of business.

b) It is provided that the liability of the reinsurer shall commence
obligatorily and simultaneously with that of the ceding insurer as
soon as the retention of the ceding insurer is exceeded.

c) The ceding insurer is required to record particulars of all amounts
ceded to the reinsurer who is entitled to inspect such records.

d) ''All losses in respect of which the reinsurer's share is estimated
to exceed an agreed figure are required to be advised to the
reinsurers within specified period of the receipt of information by
the ceding insurer.

e) All settlements, adjustments and compromises of claims including
ex-gratia payments made by the ceding insurer are binding on the
reinsurer, provided the cause of loss is within the scope of the
cover.

f) Whenever loss attaching to the treaty exceeds an "agreed amount"
the ceding company has the right to call for immediate payment
from reinsurers their share of loss. Such "agreed amount" is known
as "cash loss limit" under the treaty.

g) The ceding insurer retains an agreed percentage of the annual
premium as a premium reserve which is adjusted subsequently in
the accounts.

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