CAS Practice Exam 2025 – Complete Study Guide

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What does the term “attachment point” refer to in working cover agreements?

The threshold at which the reinsurer begins covering losses

The term “attachment point” refers to the specific threshold at which a reinsurer starts to provide coverage for losses under a reinsurance agreement. In a working cover agreement, this is a critical concept because it delineates the boundary between the primary insurer's responsibility for losses and the reinsurer's responsibility. Essentially, losses incurred up to the attachment point are retained by the primary insurer, meaning they must absorb those costs themselves. Once losses exceed this point, the reinsurer begins to cover a portion of the losses, which is essential for risk management and financial planning for both the insurer and reinsurer.

This understanding of the attachment point is crucial for actuaries and professionals involved in pricing, structuring reinsurance contracts, and assessing the overall risk exposure of their insurance portfolios.

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The maximum limit at which the insurer can expect payouts

The point at which primary insurer retains all losses

The minimum premium required for reinsurance coverage

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