Page 254 - Reinsurance Management IC85

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complexion of a reinsurance cover.
Explain

Ans: a) Treaty as a document is an agreement between
a ceding insurer and his reinsurer to automatically
accept risks that the ceding insurer intends to
share. The following are key operational
requirements and / or aspects of a treaty
document.The amount ceded to a surplus treaty
is normally expressed in the number of "lines" it
contains. A "line" is equal to the ceding insurer's
retention. Thus, where a ceding insurer has a ten
line surplus treaty on the basis of a maximum
retention of Rs. 5,00,000, the capacity of the
treaty to absorb liability over and above the
retention would be Rs. 5,00,000 (5 x Rs. 5,00,000),
and the ceding insurer would have treaty
protection for policies having sums insured up to
Rs. 30,00,000. If, however, for a particular risk
the ceding insurer decides to retain only Rs.
3,00,000 the amount ceded to the treaty for that
particular risk cannot exceed Rs. 15,00,000 ( being
5 x Rs. 3,00,000).

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