Hi there, Could anyone help me with Q4 of April 2006? If there is a Quota Share and a Surplus treaties in place, which one do you do first? Which order is the normal practice as the question does not seem to specify that clearly? Thank you!
Normally where there are several types of R/I, the question would specify the order they will apply. Here, I agree that it doesn’t, so you need to think carefully about what is being described. The question states that it is a (75%) quota share arrangement – there is no mention of surplus. However, there is a limit on the amount retained of £1,000 p.a. per life. So, it logically follows that 25% of each risk will be retained, but if this exceeds more £1,000 p.a. per life, it will be capped at £1,000 p.a – as it the case with the £5,000 p.a. policies. I wouldn’t worry about what is the “normal practice”, but rather treat each exam question on its own merits. Hope this is of help. Steve
In practice, there would be some clauses such as the inuring reinsurance clause or the priority clause that will specify the issues. The QS could be the first order, or the Surplus is the first order, according to the clauses. Both scenarios have been met.
