JOINT AND COMPOSITE POLICIES AND REINSURANCE FOR COMMON ACCOUNT
Insurers who have subscribed to the same underlying risk may combine to purchase reinsurance to protect them all against their several liabilities. For instance, four co-insurers who each subscribe 25% of an original risk having an insured value of £1 million may buy a risk excess of loss reinsurance contract for £500,000 in excess of £500,000, with the intent that if the subject matter of the insurance sustains a loss of more than £500,000, each reinsured will recover 25% of the reinsurance indemnity. Another example is an insurer who, having subscribed 100% of an original policy subject to facultative quota share reinsurance, then purchases an excess of loss treaty which covers the interests both of the insurer and its quota share reinsurers. In the latter case, particularly, such reinsurance is described as being purchased for “common account”.
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