Page 255 - Reinsurance Management IC85

Reinsurance Management

When a ceding insurer has policies where the sums
insured exceed the limits of the treaty, he
has the option of either bearing the balance
for his own account (in addition to its
existing retention) or he may effect further
reinsurance. Such balance may be reinsured
facultatively (each risk individually) or by a
further additional surplus treaty (automatic
reinsurance). Such a further additional surplus
treaty would be termed as a second surplus
treaty.

A ceding insurer may arrange first, second, third
and further surplus treaties as per need. The first
surplus treaty would have any surplus over and
above the ceding insurer's retention allotted to it
first and in priority to any other reinsurances. The
second surplus treaty would be receive a risk only
where the original sum insured was larger than
the amount of the ceding insurer's retention plus
the amount allocated to the first surplus treaty.
This method of cession repeats for each additional

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