Common Life Reinsurance methods in Kenya
1. Proportional Reassurance
In a proportional reassurance, the cedant cedes a certain proportion of the risk proposed (which is either expressed in a percentage or ratio) to the reassurer.
The life assurance premium and the death claim (if any) are then shared in the way in which the risks were initially shared.
Therefore, the reassurer receives premium proportionately to the risk ceded to it by the life office and if there is any claim, the reassurer would pay its share of the risk based on the proportion ceded to it, while the life office pays based on what it retains.
There are two types of Proportional reassurance
- Quota share
- Surplus Treaties
1. Non-Proportional Reassurance
In a non- proportional reassurance, the reassurers accept liability for all losses above a certain amount but up to a certain agreed limit.
In this case, the reassurers would only be called upon when the claims value exceeds the retention limit mutually agreed.
The life office retention limit in a non-proportional reassurance treaty is referred to as the “Deductible” or “Priority”.
It is arranged in layers, with the first layer being the most expensive
An example of how a non-proportional reassurance may be arranged in layers is shown below:
- 2 Million in excess of 1 Million 4 Million in excess of 8 Million
The examples of a non-proportional reassurance
- Risk Excess,
- Working Excess of loss,
- Catastrophe Excess of Loss
- Stop Loss
