I want to know as to what would happen if non-proportional reinsurance is written on underwriting year basis. Also are all reinsurance for liability written in claims made basis? Thanks in advance for the help!
If a non-proportional reinsurance is written on u/w year basis, it is just like the way of a proportional reinsurance written on u/w year basis, no much difference. We can simply regard a proportional reinsurance as a non-proportional reinsurance with an attachment point of zero pound.
This is not completely accurate. Proportional reinsurance is about sharing claims between the insurer and the reinsurer. So, if the gross claim gets bigger, then both the insurer's and the reinsurer's claims increase. Non-proportional reinsurance is all about capping claims. Once the claim reaches the reinsurer's layer, then the excess is paid by the reinsurer and the insurer does not have to pay anything further (unless the claim exhausts the reinsurance).
I did not mean that proportional treaties are accurately the same as non-proportional treaties. I just mean, when the attachment point of an excess-of-loss(XOL) treaty is zero, the XOL treaty could be regarded as a proportional treaty, to some extent. In practice, some XOL treaties of engineering/construction line are written on u/w year basis.
Even if you have an XoL with an attachment point of zero (which would be rather unusual) it would not operate in the same way as a proportional reinsurance treaty, eg a 50% quota share. With a claim of 100, under the XoL with an attachment point of zero, the reinsurer would pay 100, whilst under the quota share the reinsurer would only pay 50% of 100, ie 50. For the exam I would recommend regarding proportional and non-proportional reinsurance as different, per my previous post.
