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CH 6 page 35

K

kiki

Very Active Member
Hi,

for FinRe - spread loss cover , in the reading , it suggested "the definition of the claim will be such that it cannot be much greater than the sum of the premium ..." then next paragraph suggested that "Reinsurer bear the credit risk , if the balance on the experience account turns negative".

is that contradict with each other ? if claim amount can only be the accumulated premium , how the account turns negative and RI need to bear the credit risk?
 
My understanding is that any single claim cannot exceed the sum of the premiums, but there could be multiple claims which although individually less than the sum of the premiums, in aggregate can exceed the sum of the premiums.
 
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