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  #1  
Old 10-26-2008, 10:46 AM
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Default Advantages and Disadvantages of Reinsurance treaties

Since it's pretty sure that there's going to be at least one question asking you which reinsurance is best for a particular situation and list an advantage/disadvantage, why don't we work these out now?

Pro-Rata Type

Quota-Share
Advantage:
-Easy to administer.
-Offers ceding commission

Disadvantage:
-Might be ceding away profitable business

Surplus Share
Advantage:
-Allows you to keep retain smaller risks
-Offers ceding commission

Disadvantage:
-More costly to administer.

Variable Quota-Share
Advantage:
-Allows you to retain a bigger portion of more profitable risks
-Offers ceding commission

Disadvantage:
-a bit more difficult to administer than a normal QS treaty



Excess of Loss Type


Per Risk XOL
Advantage:
-Easier to administer than surplus share treaties

Disadvantage:
-Might get expensive

Per Occurrence XOL
Advantage:


Disadvantage:

Cat XOL
Advantage:


Disadvantage:


Aggregate XOL
Advantage:


Disadvantage:
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  #2  
Old 10-26-2008, 11:41 PM
rebeccap rebeccap is offline
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Default

Quote:
Originally Posted by cyc View Post
Since it's pretty sure that there's going to be at least one question asking you which reinsurance is best for a particular situation and list an advantage/disadvantage, why don't we work these out now?

Pro-Rata Type

Quota-Share
Advantage:
-Easy to administer.
-Offers ceding commission

Disadvantage:
-Might be ceding away profitable business

Surplus Share
Advantage:
-Allows you to keep retain smaller risks
-Offers ceding commission

Disadvantage:
-More costly to administer.

Variable Quota-Share
Advantage:
-Allows you to retain a bigger portion of more profitable risks
-Offers ceding commission

Disadvantage:
-a bit more difficult to administer than a normal QS treaty



Excess of Loss Type


Per Risk XOL
Advantage:
-Easier to administer than surplus share treaties

Disadvantage:
-Might get expensive

Per Occurrence XOL
Advantage:


Disadvantage:

Cat XOL
Advantage:


Disadvantage:


Aggregate XOL
Advantage:


Disadvantage:
XOLs are a bit harder to generalize; they can all be expensive, the attachment point can be too high, but they are easier to administer. I guess common sense will rule once you are given an actual example.

Last edited by rebeccap; 10-26-2008 at 11:46 PM..
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  #3  
Old 10-26-2008, 11:43 PM
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The part where you talk about ceding commission, you could say 'surplus relief'
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  #4  
Old 10-26-2008, 11:45 PM
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Aggregate XOL puts a cap on the loss ratio
All of the XOLs provide large line capacity
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  #5  
Old 10-27-2008, 12:33 AM
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Where does clash cover fit in?
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  #6  
Old 10-27-2008, 12:40 AM
rebeccap rebeccap is offline
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Quote:
Originally Posted by silverfox View Post
Where does clash cover fit in?
Ah, a wonderful reminder. Thanks silverfox!
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  #7  
Old 10-27-2008, 08:38 AM
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A major difference between pro rata and XOL treaties is that pro rata treaties usually apply the same terms as the underlying policies and provides broad coverage, while XOL may have exclusions and may only cover one type of insurance or selected causes of loss. XOL also generally has no ceding commission.

This is from Harrison.

The context of the question would determine which is an advantage and which is a disadvantage.
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  #8  
Old 10-27-2008, 08:43 AM
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Clash covers are part of liability coverage, generally per occurrence or per policy XOL treaties. It allows these treaties to apply catastrophe protection.

It protects against:
Excessive ALAE
Large losses from a single event that affects multiples insureds or multiple lines of insurance
Excess Policy Limits (XPL) and Extra Contractual Obligations (ECO)
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