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
This is the shortest memaning of reinsurance, well i was expecting some thing more comprehensive on this topic
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This blog post is a work in progress and by no means final yet.
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