Hello Mohsin, When saying can be used on its own i guess. I was meaning that this can be the only reinsurance treaty you may have without using any other own. For instance you write 100 Mios $ premium on Motor risks but you find it to heavy in case of claims deviation compared to yr surplus funds , and to the other lines of business where yr income is much below. So you will reduce the impact of this loss deviation, and/or the capital requirements attached to the risks you take, by setting up a quota share whereby you cede say 40% of the premium but also 40% of the risks (reducing thus yr capital requirements) and 40% of the claims reducing thus the impact on yr global book of business. Hope this clarifies Patrick
Amazing explanation
You said, quota share can be used on its own, do please elaborate if we are using it for our own then why we are naming it "Quota Share"?
Hello Mohsin,
When saying can be used on its own i guess.
I was meaning that this can be the only reinsurance treaty you may have without using any other own.
For instance you write 100 Mios $ premium on Motor risks but you find it to heavy in case of claims deviation compared to yr surplus funds , and to the other lines of business where yr income is much below.
So you will reduce the impact of this loss deviation, and/or the capital requirements attached to the risks you take, by setting up a quota share whereby you cede say 40% of the premium but also 40% of the risks (reducing thus yr capital requirements) and 40% of the claims reducing thus the impact on yr global book of business.
Hope this clarifies
Patrick