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

2 thoughts on “Reinsurance

  1. This is the shortest memaning of reinsurance, well i was expecting some thing more comprehensive on this topic

    Like

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