Page 319 - Reinsurance Management IC85

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u Provision for catastrophe losses.
u Provision for costs.
u Profit margin.

Q12. Briefly explain three factors that affect the
level of commissions a reinsurer is willing
to pay under a proportional treaty.

Ans: Any three of the following.
u Type of reinsurance arrangement. Treaty accounts
may have higher commissions.
u Past history of profitability. Profitable accounts will
attract more commission.
u State of reinsurance market as in a hard market
commission may fall.
u Original commission paid by the ceding company
to intermediaries. A high level of original
commission is likely to reduce the level of ceding
commission paid.
u Ceding company's administration costs. If the
ceding company's administration costs are high, a
higher ceding commission will be justifiable.
u The overall business relationship and volume of

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