The Reinsurance Recovery

When a loss occurs and becomes recoverable under the scope of the treaty, it is not usually individually advised to Trust Alliance. Instead, all such are aggregated and debited to Trust Alliance in the technical closing, also known as, Statement of Account.

In the case of the earthquake loss, Trust Alliance:
does not know the details of individual risks.
gets a statement of account from Promiseland, showing a summarized account of the various reinsurance transactions reinsured under the treaty contract.

This document acts like a bank statement from Promiseland and how much claims were payout. Under the terms of the proportional treaty, Promiseland agreed to render this statement of account to Trust Alliance every three months (quarterly).

In the 921 Taiwan earthquake, Trust Alliance does not know the exact details of Promiseland’s claims. That is, what it is claiming against such as damage on which building, property, etc. They are paying the loss through statement of account, which only reflects the total amount they are liable to pay.

Promiseland lumped all the small losses together and advise Trust Alliance through statement of account. There is no individual loss advisory because the amount of administrative work involved is not economically justifiable.

Futhermore, it will defeat the whole purpose of reinsurance, that is, less labour-intensive and lower opertional costs with no standard contracts because parties to the reinsurance contract are assumed to be equally knowledge with no need for protection of standardized language or regulation.

The reinsurance contract between Trust Alliance and Promiseland is based on utmost good faith. Trust Alliance accepts the treaty from Promiseland because of the latter’s reputation, integrity and trust on Promiseland’s underwriters and vice-versa.

However if the loss amount gets too big (exceeds the cash call limit), Trust Alliance uses a claim slip to capture each and every individual losses.