What reinsurance is defined as reinsurance excess of retention by the ceding company?

Question

Options

• ANon-proportional
• BProportional
• CCommutative
• DNon-commutative

• A
  81% (56)
• B
  6% (4)
• C
  10% (7)
• D
  3% (2)

Explanation

Non-proportional reinsurance (A) is correct because it is defined by the reinsurer only stepping in when losses exceed a specified retention threshold - meaning the ceding company absorbs losses up to its retention limit, and the reinsurer covers the excess beyond that point, hence "excess of retention."

Proportional reinsurance (B) is wrong because it involves sharing premiums and losses between the cedant and reinsurer in a fixed ratio from the first dollar of loss - there is no retention threshold that must be breached first.

Commutative (C) and Non-commutative (D) are not standard classifications of reinsurance structures; they are mathematical/legal terms describing whether order of operations matters, and are distractors with no recognized meaning in reinsurance taxonomy.

Memory tip: Think of the word "excess" - Non-proportional = "Not until it exceeds my retention." The ceding company keeps (retains) what it can handle; the reinsurer handles everything beyond that excess point.

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