Exciting Insights into Reinsurance Policies

How does a surplus share treaty work in reinsurance?

What is the retention limit for Apex fire insurance in this scenario?

How much does Geneva Re. pay of the $10,000 loss based on the ceded percentage?

Reinsurance Policy and Payment Calculations

The surplus share treaty in reinsurance involves Geneva Re accepting a portion of Apex's risks and premium. A retention limit of $300,000 is set for a single policy by Apex.

Geneva Re pays $22,500 of the $10,000 loss based on the ceded percentage of 225%.

Understanding Surplus Share Treaty: In a surplus share treaty, the reinsurer, Geneva Re, agrees to assume a portion of the risks of the insurance company, Apex, and in return, they receive a portion of the premium and liability.

Retention Limit: Apex fire insurance has a retention limit of $300,000 for a single policy, meaning they will retain any losses below this threshold and pass on the excess to the reinsurer.

Payment Calculation: To determine how much Geneva Re pays of the $10,000 loss, we need to consider the ceded percentage, which is 225% in this scenario. This percentage is calculated based on the ceded premium of $900,000 and the total premium of $400,000.

Outcome: Geneva Re will cover $22,500 of the $10,000 loss, reflecting their responsibility under the surplus share treaty and ceded percentage agreement.