What is the difference between a quota share and a surplus treaty, and which suits a book with a few very large risks?
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In a quota share the reinsurer takes the same share, say 30%, of every policy. In a surplus treaty the cedant keeps a line on each risk and cedes the rest in proportion to the sum insured, so big risks are ceded more heavily than small ones. Surplus suits a book with a few very large risks.
What the interviewer listens for
Quota share is a fixed share
Surplus cedes proportion by size
Surplus for large risks
Reinsurance and Risk Transfer · INT.NR.1.a: Explain why an insurer buys reinsurance, and work out how a quota share or surplus treaty shares premium, claims and ceding commission.
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