In practical terms, this is a forward-looking agreement, whereby the direct insurer withdraws and the reinsurers withdraw. Excess contracts generally have sufficient capacity to cover multiple lines, but in some cases, the entire amount covered by insurance cannot be covered by a single reinsurance contract. In this case, the divested insurer must either cover the balance itself or enter into a second reinsurance contract. This can be achieved by entering into a second (or third) surplus contract. The text of the contract will determine the category of insurance transactions involved (for example. B property damage) as well as the nature and proportion of risks surrendered. An insurer usually has a number of contracts that have signed different types of businesses. A`s share of the risk is 1,000,000/5,000,000.00. and the share repaid under the surplus contract is the amount greater than 1,000,000, or 4,000,000/5,000,000.00-80.0%. In a surplus participation agreement, the insurer that has withdrawn retains debts up to a certain amount, with the remaining debts transferred to the reinsurer.
The reinsurer therefore does not participate in all risks and only participates in risks greater than what the insurer has retained, which distinguishes this type of reinsurance from the sub-quota reinsurance. The overall risk covered by a reinsurance contract, known as „capacity,“ is usually expressed in several times the insurance lines. Contingent share. (Q.S) – With this form, the Cedant is required to give in and the reinsurer is required to accept a fixed share (expressed as a percentage) of each risk of the ceding company, for example. B 40%: 60%. This means that the Cedant retains 40% and emits 60% of all the risks it has written. Take, for example, an apartment building with an insurance amount of 1,000,000.00: the assignor keeps 400,000 (40%-1.1.00 00,000.00) and pays 600,000.00 (60%-1,000,000) to the reinsurer. Under the Q.S. order, there is a fixed ceiling within which the provision applies. any amount above this limit is reimbursed by any other form of reinsurance or, on an optional basis.