GIM8040 - Reinsurance and other forms of risk transfer: types of reinsurance: proportional reinsurance: quota share reinsurance example

A direct insurer writes the following contracts:

Policy Sum insured 拢 Premium (100%)
1 25,000 200
2 50,000 300
3 100,000 500

Under a 30% Quota Share reinsurance contract the following sums would be reinsured on each contract:

Policy Sum insured 拢 Premium (100%) Sum reinsured 拢 Premium to Quota Share
1 25,000 200 7,500 60
2 50,000 300 15,000 90
3 100,000 500 30,000 150

A claim of 拢12,000 on policy 1 would result in the reinsurer paying 拢3,600 (30% of 拢12,000).

A claim of 拢35,000 on policy 2 would result in the reinsurer paying 拢10,500 (30% of 拢35,000).

A claim of 拢60,000 on policy 3 would result in the reinsurer paying 拢18,000 (30% of 拢60,000).