An insurance company has a ten line surplus treaty for its theft account. A theft policy is issued to a client for $200 000 in respect of all contents. The insurer retains $40 000. A claim is agreed for $20 000. Explain what recovery, if any, the insurer could make from reinsurer
$40000 × (10 + 1) = $440 000 > $200000
Proportion ceded = ($200000 - $40 000)/$200 000 = 4/5
Recovery from reinsurer =$20 000 × 4/5 = $16 000
