Contractual reinsurance contracts can be both proportional and un proportioned. In the case of proportional contracts, the reinsurer undertakes to take over a certain percentage of the policies for which it receives this share of the premiums. If a claim is filed, it also pays the percentage indicated. However, in the case of a non-proportional contract, the reinsurance company agrees to pay claims if they exceed a certain amount for a specified period of time. The global reinsurer Munich Re describes “pro rata” as: “A term that describes all forms of quota quota and reinsurance of surplus shares, in which the reinsurer shares the same share of the premium and losses of the divested company. Country reinsurance is also known as “proportional reinsurance.” In addition to the proportional distribution between premiums and losses, the reinsurer generally pays a drop-out fee to the deranged company to reimburse the costs associated with the issuance of the underlying policy. There are two main types of contractual reinsurance, proportionally and not proportionately, which are listed below. In the case of proportional reinsurance, the reinsurer`s share of risk is defined for each policy, while for non-proportional reinsurance, the reinsurer`s liability is based on the total claims of reinsurers. Over the past 30 years, reassurance proportional to non-proportional reinsurance in the property and accident sector has shifted significantly. Direct insurers and reinsurers negotiate reinsurance contracts (insurance for the insurance company) using discretionary agreements and/or contractual contracts; in general, they are used in combination. Each of these agreements serves a specific purpose: the failed pro reinsurance is generally quite simple to manage and offers good protection against frequency and gravity. Suppose a standard insurer issues a policy for large commercial buildings, for example. B a large office building.
The policy is written for $35 million, which means that the original insurer faces a potential liability of $35 million if the building is severely damaged. But the insurer believes it can`t afford to pay more than $25 million. So before even agreeing to cancel the policy, the insurer must look for an optional reinsurance and try the market until it gets the remaining $10 million. The insurer could receive $10 million from 10 different reinsurers. But without it, it cannot agree to adopt this policy. Once he has the agreement of the companies to cover the $10 million and is confident that he can possibly cover the total amount, if there is a claim, he can enact the policy. In the case of proportional reinsurance, one or more reinsurers receive a reported percentage of each policy issued by an insurer (“written”). The reinsurer then receives this indicated percentage of premiums and pays the specified percentage of the receivables.