Page 415 - Misc Ebook IC 78

Miscellaneous Insurance

(a) Quota share basis - Under the quota share treaty
the risks are shared by the ceding company and its
reinsurers in some predetermined proportion.
Administration of the submitting accounts involve
pro-rata cessions of premium and pro-rata
recoveries on claims.

(b) Surplus basis - Under the surplus treaty, the ceding
company reinsures the surpluses over and above its
retention in terms, and within the size of the treaty.
The size or capacity of the treaty is expressed in
integral multiples of the ceding company's retention.

There may be more than one surplus treaty,
depending on the size of the risks the ceding company
may have and the facility that they may require.
These treaties are known as First Surplus, Second
Surplus, Third Surplus and so on. Administration of
the accounts is on the basis of premium or claim
bordereaux which are detailed item-wise statements
of cessions and claims. In addition, there are
commissions recoverable from the treaty

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