United Insurance Company insures Travelco for fire insurance. United reinsures part of the exposure with Promises Reinsurance Company on an excess of loss basis, with United's retention loss level equal to $150,000. In this instance, assuming a $400,000 insured loss, Promises will pay to United:

Question

Quizplus · Accepted Answer

Since United's retention loss level is $150,000, they will cover the first $150,000 of the loss. The remaining $250,000 ($400,000 - $150,000) will be covered by Promises Reinsurance Company as per their excess of loss reinsurance agreement. Therefore, Promises will pay United $250,000.

United Insurance Company Insures Travelco for Fire Insurance