Describe or draw an example of a proportional reinsurance structure.

A) Proportional reinsurance involves ceding a fixed percentage of each policy to a reinsurer, sharing both premiums and losses accordingly.

Proportional reinsurance is a type of reinsurance where the primary insurer cedes a fixed percentage of each policy to a reinsurer. This means that the reinsurer will share both the premiums and losses of the policies accordingly.

B) Proportional reinsurance is represented by a pyramid, with the primary insurer at the base and the reinsurer at the apex.

In a visualization of proportional reinsurance, it can be depicted as a pyramid. The primary insurer sits at the base of the pyramid, while the reinsurer is at the apex. This illustrates the relationship between the two parties, with the reinsurer providing support to the primary insurer.

C) Proportional reinsurance can be illustrated as a seesaw, with the primary insurer and reinsurer on opposite ends, balancing risk-sharing.

Another way to visualize proportional reinsurance is through a seesaw analogy. The primary insurer and reinsurer are positioned on opposite ends of the seesaw, symbolizing the balance in risk-sharing between the two parties. When one side goes up, the other goes down, reflecting the reciprocal nature of proportional reinsurance.

D) Proportional reinsurance resembles a pie chart, with different segments representing the proportional share of each policy.

One more way to represent proportional reinsurance is through a pie chart. Each segment of the pie chart represents the proportional share of each policy that is ceded to the reinsurer. This visual aid helps in understanding how the risk and premiums are distributed between the primary insurer and reinsurer.

Final answer:

Proportional reinsurance involves ceding a fixed percentage of each policy to a reinsurer, sharing both premiums and losses accordingly. This can be represented by a pie chart, with different segments representing the proportional share of each policy.

Explanation:

Proportional reinsurance involves ceding a fixed percentage of each policy to a reinsurer, sharing both premiums and losses accordingly. This can be represented by a pie chart, with different segments representing the proportional share of each policy. For example, if the primary insurer cedes 20% of each policy to the reinsurer, the pie chart would have a segment representing 20% of the whole.