Certified Underwriter (CU) Exam

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An underwriter is evaluating a submission for a large chemical manufacturing plant with a total insurable value (TIV) of $150 million. The underwriter's company has a per-risk treaty reinsurance limit of $50 million. The risk meets all internal guidelines for safety and loss control. What is the most appropriate next step for the underwriter to provide full coverage?

Issue a policy for $50 million and advise the insured to seek coverage elsewhere for the remainder. Decline the risk as it exceeds the company's net retention and treaty limits. Bind coverage for the full amount and notify the reinsurance department afterward. Seek facultative reinsurance for the amount exceeding the treaty limit.

Correct Answer:

Seek facultative reinsurance for the amount exceeding the treaty limit.

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