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CS Professional · IFSCA - Regulations, Listing and Compliances · Insurance and Reinsurance

Ganga Insurance IIO in GIFT IFSC has a retention of ₹40 crore on a risk of ₹100 crore under a quota-share arrangement where the reinsurer takes a fixed percentage of every policy. A loss of ₹25 crore occurs on that risk. What share of the loss does the reinsurer bear, and under what treaty type?

The reinsurer bears ₹15 crore under a quota share treaty. The insurer retains 40 percent and cedes 60 percent, so the ₹25 crore loss is split proportionately, giving the reinsurer 60 percent, which is ₹15 crore.

  1. A₹10 crore, under a surplus treaty
  2. B₹15 crore, under a quota share treatyCorrect
  3. C₹25 crore, under a facultative placement
  4. D₹15 crore, under an excess of loss treaty

Explanation

Retention is 40 of 100, so the reinsurer takes 60 percent in proportion. Loss share is 60% of ₹25 crore = ₹15 crore. Since the split is a fixed percentage on every policy, it is quota share. The ₹10 crore option wrongly applies the 40% retention to the reinsurer.

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