Reinsurance is the transfer of risk from a ceding insurer to a reinsurer. Reinsurance is the insurance of the risks undertaken by insurance companies. Reinsurance company issues the insurance contract to the primary/ceding insurance company.
Need for reinsurance:
Stabilizing the insurance company results.
Increase of capacity by Risk transfer/sharing.
Reduction in claims volatility.
EXAMPLE:
> Primary insurance company can increase its capacity and issue policy for high value risks/loss, by reinsuring the same with any Reinsurance company.
• Types of reinsurance structure can be Treaty or Facultative which can be further classified as proportional & non – proportional.
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