reinsurance contract provisions
What is the difference between sliding scale commission and profit sharing for a reinsurance contract held? Aren't they all "rebates" returned to the cedent when the loss ratio is performing better than expected.
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What is the difference between sliding scale commission and profit sharing for a reinsurance contract held? Aren't they all "rebates" returned to the cedent when the loss ratio is performing better than expected.
Comments
for context, these two are listed as separate contract provisions for the consideration of NDIC.
Sliding scale commissions automatically adjust the ceding commission rate based on the loss ratio. As your losses decrease, commission rates increase with the caveat that there is a maximum and minimum commission.
Profit sharing pays the cedant percentage of actual profits after deducting losses, expenses, and the reinsurer's margin. Profit sharing is more volatile where you could potentially have years with no commission back and years with large commissions returned.