Fictional reinsurance layer
A fictional contract exercise defines a reinsurance layer paying the portion of a covered insurer loss above100currency units, with a maximum layer payment of300. A covered loss of500occurs. The original insurer remains responsible to its policyholder under the primary policy, and there are no reinstatements, aggregation changes or other recoveries in this model. A learner assumes the reinsurer must pay400because that is the amount above attachment. Another assumes arranging reinsurance removes the original insurer’s policyholder obligation. Students must apply the supplied layer and explain which exposures remain. This is a numerical illustration rather than an actual treaty interpretation, legal advice or statement of mandatory national reinsurance terms.
1. What recovery and retention follow?
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Loss above attachment is400, but the layer limit is300. Reinsurer payment is300and the original insurer retains200under the supplied model.
2. What should be considered beyond the arithmetic?
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The exact treaty wording, collectibility, timing and counterparty risk matter. The original insurer’s primary obligation is not automatically discharged by this separate recovery arrangement.