Please see below the question on Re-insurance:
and here is the solution to it:
My main question is if at Step 3, the Cession for 1st Surplus Treaty is Rs. 24 lac then why in 4th Step, the cession amount is only Rs. 20 lac? Second: If the Max liability in 1st treaty is 25 lac then how we will know that out of this Re-insurer's share will be 24 lac and not 25 lac?
The company on the 4th risk insured 70,00,000₹ On total of two cessions. The insurer retained 2,00,000₹ risk from both the cessions and given 20,00,000₹ risk to reinsurer on first cession and 60,00,000₹ risk to reinsurer on second session. The insurer and reinsurer had another means to insure the 8,00,000 risk and they used facultative risk method.
That's what I want to understand is that why the 1st insurer assumed risk for Rs. 20,00,000/- and not Rs. 24,00,000/- as in 3rd case?
In the third case? The answer is correct. Whole risk transferred is 28, retained risk is 4 and transferred risk is 24 lakhs. Where does it say 20 lakhs?
in the question, the 4th risk is 25+45=70 lakhs. When they calculated, retained risk is 20 lakhs
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