Page 144 - Reinsurance Management IC85

The Insurance Times

This means all the risks written in household
fire portfolio will be ceded to reinsurer
automatically and the reinsurer shares 60%
of all those risks. The reinsurer pays 60% of
the claim amount arising from the underlying
risks and also charges 60% of the premium
received by the insurer on that risk.

Sum Insured = Rs. 100,000 Premium = Rs. 10,000
Claim arised = Rs.50,000

Insurer Share = Rs.40,000 Premium retained = Rs. 4000*
Insurer share = Rs.20,000

Reinsurer Share = Rs.60,000 Premium Ceded = Rs.6000*
Reinsurer Share = Rs.30,000

(* Ceding commission will usually be given to the insurer
by reinsurer)

ii) Surplus treaty: the ceding company decides the
limit of liability which it wishes to retain on
any one risk or class of risk. This limit (“line”)
will be the maximum retained amount by the
insurer. The insurer cedes to reinsurer above

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