Basis of Reassurance


In principle, there are two basis in which reassurance is done

Risk Premium Basis as applied to Group Life:

  • Provides cover solely for the death strain.
  • The amount reassured each year is the original sum assured in excess of the ceding company’s retention less the reserves applicable to that policy.
  • The risk premium rate for each year of reassurance increases with the age of the life reassured.
  • The actual reassurance premium is the product of the risk premium rate for the age attained and the sum at risk for that year.
  • Risk premiums are mostly used for individual life business

Original Term Basis

  • Treaty is arranged on the same terms as the life office has with the policy holders.
  • The reassurer receives a proportion of the premium paid to the ceding company and pays the same proportion of the claim.
  •   It attracts commission rate to relief the life office of its business acquisition costs.
  • Original term is mostly used for group life business.


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