Re-Insurance
Re-insurance that provide insurance to other insurance companies as a hedge against catastrophic loss. Reinsurance is a means by which an insurance company can protect itself against the risk of losses with other insurance companies.
Individuals and corporations obtain insurance policies to provide protection for various risks (hurricanes, earthquakes, lawsuits, collisions, sickness and death, etc.). Reinsurers, in turn, provide insurance to insurance companies.
When pricing reinsurance contracts, excess layers, umbrella coverages, and policies with liability, even a small rate difference can balloon into big losses.
Reinsurance provides its clients with a full range of services in the design, structure, and implementation of their risk-transfer programs.
There are many reasons an insurance company will choose to reinsure as part of its responsibility to manage a portfolio of risks for the benefit of its policyholders and investors.
Risk transfer:The main use of reinsurance is to allow the company to assume individual risks greater than its size would otherwise allow, and to protect against catastrophic losses. Reinsurance allows an insurance company to offer larger limits of protection to a policyholder than its own capital would allow.
Reinsurance’s highly refined uses in recent years include applications where reinsurance was used as part of a carefully planned hedge strategy.
Income smoothing:Reinsurance can help to make an insurance company’s results more predictable by absorbing larger losses and reducing the amount of capital needed to provide coverage.
Surplus relief: Reinsurance can improve an insurance company’s balance sheet by reducing the amount of net liability, and thereby increasing surplus. Surplus, assets less liabilities, is roughly the same as shareholder equity on a balance sheet of a non-insurance company.
Arbitrage: The insurance company may be motivated by arbitrage in purchasing reinsurance coverage at a lower rate than what they believe the cost is for the underlying risk.
Many insurances company provides reinsurance Package:
State-of-the-art exposure rating models that meet your specific analytical requirements
Sophisticated pricing methods to meet demands of current market conditions
Access to the most up-to-date, detailed, credible information available
The ability to perform quick and easy excess-of-loss reinsurance analyses for any layer of loss
A seamless way to export all or any portion of your analysis to other spreadsheets, systems, applications, and programs
Reinsurance companies themselves also purchase reinsurance and this is known as a retrocession. They purchase this reinsurance from other reinsurance companies. The reinsurance company who sells the reinsurance in this scenario are known as “retrocessionaires.” The reinsurance company that purchases the reinsurance is known as the “retrocedent.”
But deregulation has also brought about insurance products sold worldwide as investments and annuities and reinsurance companies which provide catastrophic coverage for domestic insurers primarily are located overseas. Therefore, in a global economy, federal oversight is far more necessary than in the past. Leaving global oversight up to state regulators is arguably negligent given the ramifications of lack of coverage during a catastrophe.