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What Is Reinsurance
Insurance Reinsurance
• Contract between an insurer • Contract between two
& a member of the public insuring organizations
• Insurer deals with the insured • Reinsurer deals with the
• Subject matter of insurance insurer
is property, person, benefits • Subject matter of reinsurance
or potential legal liability is defined portion of ceding
company’s contractual
liability
Functions Of Reinsurance
• CAPACITY : Allows the reinsured to write larger amounts of
insurance.
• CATASTROPHE : Protects the reinsured against a single,
catastrophic loss or multiple large losses.
• STABILIZATION : Helps smooth the reinsured’s overall operating
results from year to year.
• FINANCIAL : Eases the strain on the reinsured’s surplus during
rapid premium growth.
Functions Of Reinsurance
Retrocessionnaire
Retrocession
Reinsurer
Reinsurance
Insurer
(Ceding Company)
Insurance
Insured
Reinsurance Organization
• Insurance Companies
• Reinsurers
• Reinsurance Pools
• Lloyd's
• Self-Insurers
Type of Reinsurance
FACULTATIVE TREATY
Facultative Reinsurance
Advantages Premium
•Good protection against 60% Rein
40% Net
frequency/severity potential
Quota Share
Surplus Share
The Ceding Company sets a unique retention amount for each type of risk
to be reinsured under the treaty
Reinsurance Agreements
Excess of Loss
A term describing a reinsurance transaction that, subject to a specified
limit, indemnifies a ceding company against the amount of loss in excess
of a specified retention.
Advantages
•Good protection against
frequency/severity Excess of
potential,depending upon the Retention
retention size