188k views
0 votes
What type of reinsurance contact involves two companies automatically sharing their risk exposure?

a) Proportional reinsurance
b) Excess of loss reinsurance
c) Facultative reinsurance
d) Retrocession reinsurance

1 Answer

4 votes

Final answer:

Proportional reinsurance is the type of contract where two companies share risk exposure and premiums according to a fixed percentage. It is distinct from excess of loss reinsurance, facultative reinsurance, and retrocession reinsurance.

Step-by-step explanation:

The type of reinsurance contract that involves two companies automatically sharing their risk exposure is proportional reinsurance. In a proportional reinsurance agreement, the primary insurer and reinsurer agree to share the premiums and losses according to a fixed percentage. This differs from other types of reinsurance contracts like excess of loss reinsurance, which only provides coverage when losses exceed a certain amount; facultative reinsurance, which is negotiated separately for each insurance policy; and retrocession reinsurance, where a reinsurer cedes parts of their risks to other reinsurers.

User Ben Mathews
by
8.3k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.