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Financial advisory
RES5Financial Advisory Services✓An insurer retains $200,000 on a surplus treaty and writes a risk with a sum insured of $800,000. A claim of $400,000 occurs. How much does the insurer bear from its own retention?
The insurer keeps $200,000 of an $800,000 risk = 25%; the reinsurer takes 75%. Under surplus (proportional) treaties claims share in that ratio, so the insurer bears 25% × $400,000 = $100,000 and the reinsurer $300,000.
Surplus shares claims by proportion of sum insured, not on an 'excess above retention' basis like excess of loss.
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