Page 76 - Reinsurance Management IC85

Reinsurance Management

a. If PML is wrongly assessed, the insured will carry
higher liability than intended,

b. There is no standard procedure for evaluation
of PML.

c. The insurer may be tempted to depress PML, so
as to accommodate risk within his gross capacity
in case of large value risks.

d. PML does not hold good for catastrophic risks.
e. Miscalculation of PML may lead to disputes with

reinsurers.
f. A company will require highly trained and

competent professionals to assess PML.
g. Even alter assessment; PML requires to be

continuously reviewed as it may fluctuate
depending on various risk factors.

Q. Explain the concept of reciprocity and
factors which are taken into account in
reciprocal trading.

Ans: Reciprocity is the exchange of reinsurances ceded
by a company for inward reinsurance business, to

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