Page 168 - Fire Insurance Ebook IC 57

Fire and Consequential Loss Insurance

for the share of the excess of loss reinsurers to the gross net
premium income of the company for the period.
n This gives the 'pure burning rate' (that is sufficient to cover
the losses suffered by the reinsurers) which is loaded by a
factor say 100/70 or 100/80, to cover reinsurer's acquisition
costs, administrative costs, profit margin to produce the final
rate.

Other types of Excess of Loss covers

n ‘Per Risk’ Cover : This is arranged to protect loss affecting an
individual risk. e.g. a single fire loss in excess of loss retention.

n ‘Per Event’ Cover : This is arranged to loss affecting more than
one risk and arising due to natural perils like floods, cyclone,
earthquake, etc., or social perils like riots.

Indian fire reinsurance programme

The Indian Fire Reinsurance programme is reviewed annually and
arranged by GIC Re in consultation with four public sector companies.,
and finally approved by the Government of India.

The objective is to maximise retention within the country in order to
save foreign exchange outgo and to achieve this the following methods
are adopted.
n Fire reinsurance in India is underwritten on Probable Maximum

Loss (PML) basis

n Quota Share Cessions of all the business, written by any company
is ceded to GIC.

n The surplus after obligatory cessions is dealt with depending on

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