[Insurance Companies – Reinsurance (Non-Proportional / Excess of Loss)]Cover It Insurance has a non-proportional reinsurance...

In anon-proportional excess of losscontract, the reinsurer pays only the amountabove the retention (the deductible), up to its limit.

Retention =$300,000

Reinsurer’s limit =$600,000

Maximum reinsurance payout =$600,000

Now apply it to a$600,000 loss:

Cover It Insurance pays the first$300,000(its retention).

The remaining$300,000is within the reinsurer’s limit, so ZYX-Reinsurance pays$300,000.

Option A is incorrect—loss does not exceed retention, so reinsurer pays nothing.

Option B is incorrect—no reinsurance applies below $300,000.

Option D is incorrect because for a $900,000 loss, reinsurer would pay themaximum limit of $600,000, but Cover It would pay $300,000 retention plus the remaining $0? Actually total loss 900k: cover it pays 300k retention + 0 above? No, Cover It also pays any amount above reinsurance layer -> 900k minus 300k retention minus 600k limit = 0. The answer shown is still incorrect based on the numbers.

OnlyCis correctly calculated.