ARe common mistakes
ARe · Understand the traps and how to avoid them.
Treating 'the reinsurer' as a single undifferentiated counterparty when answering questions about who the customer is and what each party owes the other, instead of distinguishing cedent, reinsurer, retrocessionaire, broker, and MGA roles.
Candidates carry over a primary-insurance mental model in which the policyholder is the only customer, so they collapse the layered relationships in a reinsurance transaction into one.
What to do instead
Before answering, sketch the chain (policyholder to cedent to reinsurer to retrocessionaire, with broker alongside) and state which link the question is about; practice identifying the customer of each specific service or obligation.
Confusing the cedent's obligation to the reinsurer with the reinsurer's obligation to the cedent, for example describing the reinsurer as owing a duty to the original policyholder or the cedent as owing claims-handling duties to the reinsurer.
The flow of premium, risk, and claims runs in opposite directions from primary insurance, and candidates map duties onto the wrong party under time pressure.
What to do instead
For each scenario, write two columns, 'cedent owes' and 'reinsurer owes', and fill them before choosing an answer; verify that any duty to the original insured is attributed only to the cedent.
Selecting a reinsurance type by name rather than by the loss mechanism it actually covers, such as choosing quota share for a question describing a need to cap severity on a single large risk, or choosing excess of loss where the need is proportional capacity.
Memorized labels (quota share, surplus, per risk, per occurrence, aggregate, facultative) are recalled without mapping each to its function, so surface wording drives the choice.
What to do instead
Build a two-axis grid (proportional versus non-proportional; per risk versus per occurrence versus aggregate) and place each product in it; for every practice item, name the loss pattern described before naming the product.
Applying proportional concepts to non-proportional treaties, for example assuming a quota share cedes the same percentage of every loss regardless of size, or expecting an excess of loss layer to share premium proportionally with loss.
Both families use overlapping vocabulary (attachment, limit, retention, cession), and candidates transfer proportional intuition into non-proportional settings.
What to do instead
Drill the defining distinction: proportional shares loss and premium by fixed percentage from the first dollar; non-proportional responds only above a retention up to a limit; test each answer against that distinction.
Reading a treaty clause in isolation and answering without checking how the definitions, exclusions, and loss-occurrence wording elsewhere in the contract modify it.
Exam items quote a single clause for readability, and candidates treat the quoted text as complete rather than as part of an integrated contract.
What to do instead
When a clause is quoted, ask what defined terms it uses and where those terms would be defined; prefer answers that are consistent with the whole treaty over answers that are merely consistent with the quoted sentence.
Confusing the roles of the treaty wording, the slip or placing information, and the endorsements or addenda when asked which document controls a disputed term.
Candidates learn the documents as a list without learning their hierarchy and function, so they pick whichever document is mentioned in the stem.
What to do instead
Memorize the function of each document (slip records the negotiated deal, wording is the operative contract, endorsements amend it) and the general rule that specific negotiated amendments prevail over general printed wording.
Ignoring the timing and conditionality of reinsurance recovery, for example assuming the reinsurer pays at the same time as the cedent or that notice and proof-of-loss requirements are optional formalities.
Candidates focus on amounts and percentages and skip the procedural clauses (notice, claim submission, follow-the-settlements, cut-off) that determine whether recovery actually occurs.
What to do instead
For every claims scenario, run a checklist: was notice given, was the claim documented, does follow-the-settlements apply, and is the loss within the treaty period; eliminate answers that skip these steps.
Answering operational-challenge questions with a generic 'communicate better' or 'escalate' response instead of identifying the specific control, data, or governance step the situation requires.
Challenge questions are phrased as narratives, and candidates default to soft answers because they have not linked each challenge type (data quality, disputes, collections, regulatory change, catastrophes) to a concrete control.
What to do instead
Build a challenge-to-control table (for example, data quality maps to reconciliation and bordereau review; dispute maps to audit rights and arbitration clauses) and select the answer naming a specific mechanism.
Assuming reinsurance resolves a problem for the cedent without considering the reinsurer's perspective, such as missing that a cedent's poor data or late reporting creates a recoverable-collection or dispute risk on the other side.
Candidates study from the cedent's viewpoint and do not habitually flip the transaction to ask how the counterparty is exposed.
What to do instead
After reading any scenario, restate it once from the reinsurer's seat; if an answer only addresses one party's interest, check whether a two-sided answer is available and better.
Choosing an answer that is true in general but does not answer the specific question asked, for example explaining what facultative reinsurance is when the item asks why a cedent would choose it for a particular risk.
Under time pressure, candidates match on familiar keywords in the stem and stop at the first true-sounding option rather than confirming it addresses the exact ask.
What to do instead
Underline the operative question word (why, which, what happens if) and the subject of the stem, then reject any option that is accurate but off-target; practice with items that contain true but irrelevant distractors.