What provides that the reinsurer assumes an agreed percentage of each risk being insured, sharing all premiums and losses accordingly with the reinsured?

Question

Options

• APro rata
• Bsurplus share
• CQuota share
• Dstructured premium

• A
  2% (1)
• B
  4% (2)
• C
  84% (42)
• D
  10% (5)

Explanation

Quota share reinsurance is a proportional treaty where the reinsurer takes a fixed, predetermined percentage of every risk the cedent writes - sharing that same percentage of all premiums and all losses automatically, exactly as described in the question.

Why the distractors are wrong:

• A. Pro rata is a broader category (umbrella term) that encompasses both quota share and surplus share - it's not the specific mechanism described.
• B. Surplus share is also proportional, but the reinsurer's participation varies by risk size (only kicks in above a retained line), so the percentage is not the same for each risk.
• D. Structured premium is not a standard reinsurance treaty type - it's a distractor with no recognized meaning in this context.

Memory tip: Think of "quota" as a fixed quota - like a classroom quota that applies equally to everyone. In quota share, the same percentage applies to every single risk, no exceptions, making it the simplest and most automatic of all proportional treaties.

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