Indications will now be made as to the proper application of various types of reinsurance in different branches of insurance.
Reinsurance in Fire Insurance Business
The surplus treaty is most widely used. Quota share treaties are used by the newly established companies or with regard to the new business of established companies.
Excess of loss treaties is utilized for catastrophe risks or where there is a possibility of accumulation of risks leading to conflagration fire, or where fire policies provide additional covers such as cyclone, hurricane flood etc.
Reinsurance in Marine and Aviation Insurance Business
Quota share and surplus are quite common even though the facultative method is still very widely used.
Excess of loss and stop loss arrangements are also made in catastrophe hazards, such as general average, the total loss to hull etc.
Reinsurance in Accident Insurance Business
All types of treaties are commonly used.
In cases of hazardous elements or where accumulation and catastrophe are apprehended or in cases of liability insurances, an excess of loss or stop loss is most favored. Pools are considered in special types of risks, such as crop insurance.
The facultative method is not much used unless the business is beyond the absorption capacity of the treaty.
The facultative method is also used when the ceding company does not wish to interest the treaties for some obvious reasons.
Reinsurance in Life Insurance Business
The most commonly used type is the surplus treaty. The facultative cover is also still in use although in a very limited degree.
Pools are used for various types of impaired lives, such as lives suffering from heart disease, blood pressure, diabetes etc.