ACE ACE Reinsurance & Treaty Concepts 2

Question 1

Under a surplus share treaty, what determines the amount of risk ceded to the reinsurer?

Accepted Answer

The amount by which the policy limit exceeds the cedant's retention line

Answer

In a surplus share treaty the ceded amount equals the policy limit minus the cedant's retained 'line,' with the reinsurer covering the surplus portion.

Question 2

What is a 'loss corridor' in an aggregate reinsurance structure?

Accepted Answer

A band of aggregate losses retained by the cedant between two reinsurer layers

Answer

A loss corridor is a layer of aggregate losses sandwiched between two reinsurance covers that the cedant must absorb itself.

Question 3

Which term describes the primary insurer's share of risk that it retains and does not cede to a reinsurer?

Accepted Answer

Net retained line

Answer

The net retained line (or net retention) is the portion of each risk the cedant keeps for its own account after ceding the rest.

Question 4

What is retrocession in the context of reinsurance?

Accepted Answer

A reinsurer ceding part of its assumed risk to another reinsurer

Answer

Retrocession occurs when a reinsurer (the retrocedant) itself purchases reinsurance to further spread the risk it has accepted.

Question 5

In an excess-of-loss per-risk treaty, what does the 'attachment point' represent?

Accepted Answer

The loss amount the cedant must retain before the reinsurer's coverage applies

Answer

The attachment point (or retention) is the dollar threshold the cedant bears on any single risk before excess-of-loss coverage is triggered.

(ACE) ACORD Certified Expert Practice Test

(ACE) ACORD Certified Expert Practice Test

ACE ACE Reinsurance & Treaty Concepts 2