Explain the various methods of reinsurance
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《lmportant Methods of Reinsurance》
●Shopping or 'Street' Reinsurance:
Under this method, there is no standing agreement regarding reinsuring of risk of one company by the other. Each policy is treated on an individual basis. The reinsurer is sought only when the need of reinsurance on a policy arises.
The reinsurer scrutinizes each case on its merits and may accept the risk on any terms and conditions or may decline it. Since the ceding company is not certain about the availability of reinsurance and a term, it will exercise a greater care in selecting the risk.
●Facultative Reinsurance:
The essential feature of this method is that each individual risk is submitted by the ceding office to the reinsurer who can accept or decline whatever sum they consider appropriate subject to the amount of their acceptance being approved by the ceding office. The reinsurer is offered the particulars of original contract.
The reinsurer will see the plan and report on. The risk offered for reinsurance. The reinsurer may qualify the acceptance subject to plan and report. The ceding office may retain certain amount on the insurance. The agreement does not make it binding upon the reinsuring company to provide reinsurance on a particular risk.
● Automatic or Treaty Reinsurance :
Under this method, there is an agreement between the ceding office and reinsurer office that the amount of insurance on a policy above the retention of the ceding office shall be submitted by it for reinsurance and the same shall be accepted by the reinsuring company.
As soon as the original contract is completed the excess above retention amount becomes automatically reinsured under the agreement.
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Hope it helps!!! :)
________________________________
《lmportant Methods of Reinsurance》
●Shopping or 'Street' Reinsurance:
Under this method, there is no standing agreement regarding reinsuring of risk of one company by the other. Each policy is treated on an individual basis. The reinsurer is sought only when the need of reinsurance on a policy arises.
The reinsurer scrutinizes each case on its merits and may accept the risk on any terms and conditions or may decline it. Since the ceding company is not certain about the availability of reinsurance and a term, it will exercise a greater care in selecting the risk.
●Facultative Reinsurance:
The essential feature of this method is that each individual risk is submitted by the ceding office to the reinsurer who can accept or decline whatever sum they consider appropriate subject to the amount of their acceptance being approved by the ceding office. The reinsurer is offered the particulars of original contract.
The reinsurer will see the plan and report on. The risk offered for reinsurance. The reinsurer may qualify the acceptance subject to plan and report. The ceding office may retain certain amount on the insurance. The agreement does not make it binding upon the reinsuring company to provide reinsurance on a particular risk.
● Automatic or Treaty Reinsurance :
Under this method, there is an agreement between the ceding office and reinsurer office that the amount of insurance on a policy above the retention of the ceding office shall be submitted by it for reinsurance and the same shall be accepted by the reinsuring company.
As soon as the original contract is completed the excess above retention amount becomes automatically reinsured under the agreement.
________________________________
Hope it helps!!! :)
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