Page 261 - Reinsurance Management IC85

Reinsurance Management

Is reciprocity required : Many ceding insurers
continue to request reciprocity from treaty
reinsurers even though the ceded business may
not lend itself to such a business relationship.

Ceding Insurer's retention : All reinsurers
should ensure that the ceding insurer's retention
is of sufficient size and that it is indicative of
risk bearing by the insurer.

Commission Terms : Commission terms
progressively reduce for cessions at higher level
surpluses. The logic is that the imbalance of the
treaty can cause even one loss to eat away the
profits of several years and the reinsurers should
be able to build up funds to pay for the adverse
years.

Premium Reserves : Previously treaties used to
provide for premium reserves and also even loss
reserves which carry a low rate of interest. These
are a financial drag on the reinsurer.

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