Page 50 - Reinsurance Management IC85
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Reinsurance Management
This is based on mutual trust between insurer and
reinsurer since it interests of both are common. "Follow
the fortune" does not mean that reinsurer will participate
in the financial losses of the ceding company.
The clause provides that the reinsurer will follow the
reinsured in all matters relating to the original policy
and cession including settlements not strictly payable
under the policy but in matters brought upon by the
reinsured himself such as financial difficulties or
insolvency.
Q. Explain the different methods of profit
commission calculation.
Ans: Reinsurance commission on premiums received by the
reinsurer is mainly to provide for acquisition co. of
the ceding company. Commission payable by the
reinsurer to the ceding company on the profits and
the treaty is termed as profit commission. The
underlying principle is that the profits under the treaty
is attributable to a large extent to the careful
underwriting of the ceding company.
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