Reinsurance

Reinsurance is basically insurance for insurers.

There are broadly speaking two classes of reinsurance:

• Proportional: Reinsurer covers a risk by taking a cut of the premium  and covering any losses in proportion to the amount of risk ceded
• Non-proportional: Reinsurer covers losses in excess of a certain amount for a premium

Proportional reinsurance includes:

• Quota share reinsurance
  • % of risk ceded to the reinsurer
  • insurer and reinsuer share premiums and losses as they arise on an equal proportion

• Surplus reinsurance
  • offers coverage to larger risks above a certain threshold and up  to a certain limit of Sum Insured
  • the cost sharing of losses is on a proportional basis as follows

Non-proportional reinsurance includes:

• Excess of Loss reinsurance
  • reimburses losses above a certain limit to the insurer
  • sold on a per risk basis or on an event basis

• Stop Loss reinsurance

• Catastrophe reinsurance