PRESENTATION ONQUOTA-SHARE TREATY

FIROZ ALAMRoll no. 516 013 018Master of Actuarial Science ProgramDepartment of Banking & InsuranceFaculty of Business StudiesUniversity of Dhaka

QUOTA-SHARE TREATYTYPE OF REINSURANCE

ReinsuranceFacultative

Proportional Excess of Loss

TreatyProportional

QUOTA-

SHARESurplus

Non-Proportional

Excess of Loss

Per Risk Per Occurence

Stop Loss

QUOTA-SHARE TREATYDEFINITION

Quota-share treaty is a type of Pro-Rate Reinsurance Contract in which the Insurer and Reinsurer shares premiums and losses according to a fixed percentage.

QUOTA-SHARE TREATYDEFINITION

Quota-share reinsurance allows an Insurer to retain some risk and premium, while sharing the rest with an insurer upto a predetermined maximum coverage.

QUOTA-SHARE TREATYNOMENCLATURE

A quota-share treaty is usually named by the amount ceded.i.e., a 60% quota-share means 60% has been ceded and 40% retained

QUOTA-SHARE TREATYCHARACTERISTICS

Obligatory in nature Retention and Cession in every risk Operates on fixed percentage basis

QUOTA-SHARE TREATYUSES

Suitable for young, developing countries or new companies Suited for limiting the risk for random fluctuation and risk of change

QUOTA-SHARE TREATYADVANTAGES

Simple form and easy to operate and administer Works like a partnership Useful for reciprocal exchange

QUOTA-SHARE TREATYDISADVANTAGES

Inflexible Method Does not sufficiently address the direct Insurer’s reinsurance requirements Cannot be used to balance portfolios Restricts the direct Insurer’s profit making options

QUOTA-SHARE TREATYDIVISION OF INSURANCE, PREMIUMS, AND LOSSES

Particulars Direct Insurer’sRetention (25%)

Ceded to Reinsurer (75%)

Total

Policy A Sum Insured 6,250 18,750 25,000 Premiums 100 300 400 Losses 2,000 6,000 8,000Policy B Sum Insured 25,000 75,000 100,000 Premiums 250 750 1,000 Losses 2,500 7,500 10,000Policy C Sum Insured 37,500 112,500 150,000 Premiums 375 1,125 1,500 Losses 15,000 45,000 60,000

QUOTA-SHARE TREATYGRAPHICAL REPRESENTATION

Policy 1Policy 2

Policy 3Policy 4

Policy 5

05000

10000150002000025000300003500040000

25003000 5000 8000 10000

7500 9000 1500024000 30000

Direct Insurer'r Retention (25%) Ceded to Reinsurer (75%)

Thank you