Page 177 - Fire Insurance Ebook IC 57

The Insurance Times

d. Quota share treaty - Under the Quota share treaty,
the ceding insurer and the reinsurer is legally bound to
cede and accept a certain fixed share of every risk
respectively. The obligatory cessions of certain risk
percentage (fixed by IRDA ) to GIC can be treated as
' Quota share treaty'.

Q2. What factors must be considered for
deciding on retention.

Ans. There are several factors which are considered for
deciding on retention. They are :
(i) The financial status of the insurers, as reflected in
capital and reserves.
(ii) The premium income of insurers , as the insurer
with a small premium income would not be able to
sustain a loss as compared to the insurer with a
large premium income.
(iii) The class experience, which involves (a) the degree
of fire hazard present. (b) the extent of damage
likely to be sustained. (c) the possibility of fire
extinguishment.

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