Granite Insurance Company entered into a treaty reinsurance agreement with Rock Solid Reinsurance (RSR). Granite's retention limit is $400,000 and RSR agreed to provide reinsurance for up to $2.0 million. If Granite writes an $800,000 policy, RSR is responsible for 50 percent of the losses. If Granite insures a $1.6 million risk, RSR is responsible for 25 percent of any losses. What type of reinsurance arrangement did Granite enter into with RSR?

Question

Quizplus · Accepted Answer

In a surplus share reinsurance arrangement, the reinsurer covers a proportion of the risk above the insurer's retention limit. Here, RSR covers different percentages of the risk depending on the size of the policy, which is characteristic of surplus share reinsurance.

Granite Insurance Company Entered into a Treaty Reinsurance Agreement with Rock