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

Under the IFSCA insurance framework, a ceding insurer in the IFSC passes part of its risk to a reinsurer. Which statement correctly describes the nature of this arrangement?

The ceding insurer stays liable to its policyholder, and reinsurance is a separate contract between insurer and reinsurer. The insured has no direct claim on the reinsurer, and ceding risk does not extinguish the insurer's own obligation to the policyholder.

  1. AThe policyholder gains a direct contractual right against the reinsurer, replacing the insurer
  2. BThe ceding insurer remains liable to its policyholder, and the reinsurance is a separate contract between insurer and reinsurerCorrect
  3. CThe reinsurer must issue policies in its own name to the original insured
  4. DReinsurance extinguishes the ceding insurer's liability to the extent ceded

Explanation

Reinsurance is a contract of indemnity between the insurer and the reinsurer. The original insured has no privity with the reinsurer, and the ceding insurer stays fully liable to the policyholder. Options saying liability is extinguished or transferred confuse reinsurance with novation.

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