Quota share with sliding scale commission
Is a reinsurance contract of 75% quota share and a sliding scale commission considered as risk transfer?
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Is a reinsurance contract of 75% quota share and a sliding scale commission considered as risk transfer?
Comments
This isn't enough information to give a definitive answer. It depends on the specifics of the sliding scale commission.
If the commission were not on a sliding scale and set at something like 10% of premium then there would be risk transfer because the reinsurer is likely exposed to a significant loss because they are assuming responsibility for 75% of the primary insurer's risk.
But a sliding scale could theoretically be structured to reduce the insurer's commission to the point where the reinsurer always makes a profit. In that case, there would be no risk transfer.