Page 181 - Fire Insurance Ebook IC 57

The Insurance Times

Proportional - here the ceding company decides
what part of original insurance to retain, and what
part to cede to a reinsurer. Premiums and losses
are then also shared in the same proportion that
the ceding company's retention and the reinsurers'
share bear to the sum insured of the original
insurance. They are of two types, Quota share
and Surplus treaty.(ii) Non- proportional -here the
proportion is variable.

Q6. What is surplus treaties? Discuss the salient
features.

Ans. In this treaty, the surplus of a risk beyond the amount of
the ceding insurer's retention is reinsured. The limit up
to which the surplus can be reinsured is determined by
the size of the treaty measured in terms of lines, which
is the ceding insurer's net retention.

For e.g, under a twenty line treaty, reinsurance

protection is available up to an amount equal to twenty

times the retention of the ceding insurer. This treaty

is called a 'first surplus treaty'. It may again be

supplemented by a second surplus treaty to absorb

the amounts which are beyond the scope of the first

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