Page 166 - Fire Insurance Ebook IC 57

Fire and Consequential Loss Insurance

h) Accounts are rendered on fixed intervals like quarterly or half
yearly basis.

i) The treaty may be terminated by either party on giving the
prescribed notice.

j) Provision is made for settlement of disputes through arbitration.

Comparison between surplus treaty and facultative
methods

Surplus treaty Facultative method

The reinsurer cannot decline to The reinsurer can decline to
accept any cession accept any cession

Treaty reinsurance involves It involves more cost
much less clerical labour and
general costs

Rights and obligations of each party Every contract is separate

are clearly defined in the treaty and may lead to problems

agreement of interpretation

Treaty ensures a constant and regular Here the flow of business is

flow of business for reinsurers less

Reciprocal exchange of business Reciprocal exchange of is
possible business is not possible

Non-proportional treaties:-

n Non Proportional treaties do not apply to specific risks but to
losses covered under the portfolio.

n The insurer limits the amount of loss for any one claim which is
called the deductible (underlying limits).

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