What is a form of reinsurance whereby the reinsurers and the reinsured both share a proportional part of the original premiums?

Question

Options

• APro rata
• BPartial fix
• CPre-defined data
• DNone of the above

• A
  76% (32)
• B
  14% (6)
• C
  5% (2)
• D
  5% (2)

Explanation

Pro rata reinsurance is correct because it describes an arrangement where both the reinsurer and the ceding (reinsured) company share premiums, losses, and expenses in the same proportion - if the reinsurer takes 40% of the risk, it receives 40% of the premium and pays 40% of any loss.

"Partial fix" (B) is not a recognized reinsurance term - it's a fabricated distractor with no meaning in insurance or risk management. "Pre-defined data" (C) is similarly a nonsense phrase in this context, belonging to data/IT vocabulary rather than reinsurance. "None of the above" (D) is incorrect because option A is a well-established, real answer.

Memory tip: Think of "pro rata" as "proportional sharing" - the Latin root pro rata literally means "in proportion," which perfectly captures how premiums and losses are split by the same ratio between the reinsurer and the insured.

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