Page 185 - Fire Insurance Ebook IC 57

The Insurance Times

and good spread of risks. For facultative method,
the business is unpredictable .

(v) Reciprocal exchange of business is possible under
treaty reinsurance methods either on the basis
of profitability or premium volume. This
facility is not available under the facultative
method.

Q8. Elucidate with the help of examples the
concept of excess of loss treaty under non-
proportional form of treaties.

Ans. In many cases, despite the protection offered by
facultative and surplus treaty reinsurance, a catastrophic
loss may still bleed the insurers.

The large accumulation of values in modern industrial
risks expose the insurers to the risk of a heavy loss.
Secondly, the transaction of special perils insurance too
involve an element of catastrophic loss, caused by riots,
earthquake and floods. The underwriting of risks in a
conflagration district or a congested area also involves
a similar problem.

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