Match each reinsurance scenario or operational characteristic with the correct corresponding term.
- An insurer evaluates a unique $50 million industrial complex and negotiates specific risk transfer terms just for this single property.Facultative Reinsurance
- An insurer and a reinsurer sign an annual contract where all new auto policies automatically have 20% of their risk and premium transferred.Treaty Reinsurance
- A global reinsurer, having accepted risks from multiple primary carriers, transfers a portion of its own liability to another risk-bearing entity.Retrocession
- An insurer issues a policy to a homeowner and remains entirely responsible for paying the homeowner's covered losses, despite having transferred most of the risk.Primary Insurer
Answer
The individual property negotiation matches Facultative Reinsurance; the automatic auto policy transfer matches Treaty Reinsurance; the reinsurer transferring its own liability matches Retrocession; and the entity directly responsible to the policyholder matches Primary Insurer.
Each scenario accurately describes the fundamental operations of different reinsurance concepts. Facultative is for individual risks, Treaty is for automatic classes, Retrocession is reinsurance for reinsurers, and the Primary Insurer always retains direct responsibility to the insured.
Step-by-Step Solution
Key Concept
Reinsurance Mechanisms and Roles
Estimated Time:1m 30s