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Objectives of Reinsurance

IndianMoney.com Research Team | Posted On Thursday, April 02,2009, 09:04 PM

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Objectives of Reinsurance

 

 

Methods of Reinsurance

When an insurance company defends itself with other insurance companies against the risk of losses is called Reinsurance. Individuals and corporations take insurance policies to provide safeguard for various risks like hurricanes, earthquakes, lawsuits, collisions, sickness and death, etc.. Reinsurers, in turn, provide insurance to insurance companies. Reinsurance is an expansion of the concept of insurance, in that it passes on part of the risk for which the original insurer is liable. Reinsurance is just that the ‘insured’ is another insurer, known as the ‘reinsured’.      

By distributing risk, reinsurance allows the insurance industry to function more effectively. Reinsurance allows insurance companies to write larger amounts of insurance, protects against large losses, helps insurers to   protect their internal business against swings in business cycles and stabilizes their year to year operations, and helps provide underwriting expertise for new lines of insurance or new markets.

Before reinsuring companies has to consider whether they require reinsurance or not, If they required, what type of reinsurance is most accurate ,What level of reinsurance is required to ensure an appropriate mix of surplus protection versus the potential for retaining profit within the captive, How to purchase reinsurance and from whom to purchase the reinsurance. Reinsurance companies are usually very large, well funded and have a wide spread of operations. Insurance Regulatory and Development Authority Act, 1999 will apply to reinsurance.

Objectives of Reinsurance

1.    To bring into focus different mechanisms and methodologies of reinsurance

2.    To acquaint the participants with principles and practices of reinsurance accounting

3.    To introduce the participants to security analysis

4.    To introduce the participants with the methodology of reinsurance ratings 

 
 

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