Alberta General Insurance Level 1 Practice Exam

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What is the main purpose of Treaty Reinsurance?

  1. To individually assess each risk before acceptance

  2. To automatically accept portions of liability within specified business classes

  3. To eliminate the need for reinsurance

  4. To cover only the proportion of risks exceeding a set threshold

The correct answer is: To automatically accept portions of liability within specified business classes

Treaty Reinsurance is an agreement between an insurer and a reinsurer to automatically accept portions of liability within specified business classes. It is not meant to assess each risk individually (option A), nor is it meant to eliminate the need for reinsurance (option C). Additionally, it does not cover only the proportion of risks exceeding a set threshold (option D). Therefore, the main purpose of Treaty Reinsurance is to automatically accept portions of liability within specified business classes.

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