Fire and Consequential Loss Insurance - IC 57 Exam Study Notes

Under proportional treaties the ceding company decides the part of the original insurance, it wishes to retain for its own account and cedes the balance to the reinsurer.
Under a quota share treaty, the ceding insurer is bound to cede and the reinsurer bound to accept a fixed share of every risk coming within the scope of the treaty.
The purpose of surplus treaty is to reinsure the surplus of a risk beyond the amount of the ceding insurer's retention.
CAT Excess of Loss (XoL) cover protects the insurers Net Retained Account from losses of catastrophe nature e.g. losses caused by weather perils such as STFI ; natural perils such as EQ and resultant tsunami, landslide bush fire etc. and political risks such as Riots, SRCC or even conflagration.
The ?burning cost? is arrived at by taking a fixed period (say 4 years) and computing the ratio of the claims paid and outstanding for the share of the excess of loss reinsurers to the gross net premium income of the company for the period.

Important Points for IC 57 - Fire and Consequential Loss Insurance Exam