Pro-rata reinsurance:
A) commits the reinsurer to pay part of a claim, but only after the primary insurer's coverage has been completely exhausted
B) is distinguished by very high retention amounts
C) means losses, premiums and expenses are divided proportionately by the primary insurer and the reinsurer
D) is only sold by alien reinsurers, and then only at very high rates

Question

Quizplus · Accepted Answer

Pro-rata reinsurance means that losses, premiums and expenses are divided proportionately by the primary insurer and the reinsurer. This is in contrast to excess-of-loss reinsurance, where the reinsurer only pays when losses exceed a certain amount. The other options are incorrect as they do not accurately describe pro-rata reinsurance.

Pro-Rata Reinsurance