Page 26 - Reinsurance Management IC85

Reinsurance Management

For sums insured in excess of Rs.31,00,000, separate
facultative reinsurance arrangements should be done for
the excess.

b. Advantages:
i. Premium is not given away on each and every
risk,

ii. Automatic reinsurance protection.

iii. The ceding company can retain a larger
premium by varying its retentions for different
classes of risk.

Disadvantages:
i. Higher administrative costs for the ceding

company in maintaining risk registers,
controlling commitment per risk, fixing net
retentions and surplus on each risk and
calculation of reinsurance premium.

ii. For the reinsurer, unbalanced distribution of
risk and exposure may occur.

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