In Original terms reinsurance - Reinsurance commision is paid by the reinsurer Reinsurance premium is percentage amount of premium received by cedant - depending on the percentage reinsured In Risk Premium Reinsurance Does cedant get reinsurance commision ? Risk premium is charged by the reinsurer on it’s own terms.
Hello Anaayaa Yes, that's right for original terms. For risk premium then the reinsurer does not usually pay commission, but it does sometimes happen as a form of financial reinsurance. Commission is paid up front and is repaid through higher reinsurance premiums. Yes, for risk premium the reinsurer sets its own reinsurance premiums. Best wishes Mark
A life insurance company has asked a reinsurer to quote for risk premium reinsurance of a standard whole life assurance contract. The terms it has been offered are on a guaranteed rate basis and include a profit participation clause. With this, the reinsurer’s profit as defined by a set formula is returned to the direct writer at the end of every year (unless it is negative, in which case it is carried forward to be offset against future profits). The profit formula is: Profit = reinsurance premium × 90% – reinsurance commission – reinsurance claims paid. (ii) Discuss the advantages and disadvantages to the direct writer of these terms. [5] I am unable to understand this. thanks Anaayaa
Which part of the question are you unable to understand? The question is asking you to think about why an insurer may or may not like the specific terms set out in the question. Brainstorm based on the question specifics; eg is the guaranteed rate desirable? What about the profit participation clause? And the annual carry forward of losses? I hope you get the idea. The ability to apply the core reading to specific questions such as this is an important skill that you will need to demonstrate to pass.
Hi Mark, I'd like an answer to this as well please since i may be able to find advgs/disadvgs relating to the guarantee but I'm not sure about disadvantages related to profit sharing, specifically the losses rolling over. Rolling over losses may possibly harm the negotiation of future reinsurance rates or perhaps lead to an unplanned payment to the reinsurer? I'm just guessing. Thanks!
I'm not really sure what you are asking here. The solution is given in Chapter 24. So there's no need to guess the answer. You can attempt the question and then check it out against the solution. Best wishes Mark
Hi Mark, Would like to ask what are the key factors affecting whether a life insurer will use quota share reinsurance or individual surplus reinsurance? If the total sum assured is fixed (without-profits), will both reinsurance have the same effects?
A very similar post was started a few days ago. Have a look at my reply to April 2010 Q3. Best wishes Mark
