Reinsurance

Question 1

How is a customer’s relationship different in co-insurance compared to reinsurance?

Answer 1

Co -insurance - customer has a direct contractual relationship with each co-insurer.
Reinsurance - customer doesn’t need to know a risk has been reinsured, there’s no contractual relationship between the original insured and the reinsurer.

Question 2

Purpose of reinsurance?

Answer 2

• Smoothing peaks/troughs (i.e. looks good to investors as shows stability and allows insurers to spread large losses over time)
• Protects portfolio (i.e. insurers want to protect the pool of accumulated funds from the effects of large losses such as weather claims)
• Improves customer service (i.e. insurers can accept more risks with greater finanical backing)
• New business areas - provides a safety net for insurers to experiment/grown in new areas withou fear of bankrupcy

Question 3

What is faculative insurance?

Answer 3

Reinsurance on a single known risk - i.e. flood.

Question 4

Who are the 3 main reinsurers?

Answer 4

• Specialist reinsurers who don’t offer normal insurance business
• Lloyds Syndicates
• Insurance companies who also act as reinsurers

Question 5

Reinsurers are often limited liability companies - true or false?

Answer 5

True

Question 6

When a reinsurer reinsurers this is known as?

Answer 6

Retroceding (risk is placed by retrocession)

Question 7

Insurers who buy reinsurance are known as?

Answer 7

The reinsured, cedant or ceding office.

Question 8

The 2 main reinsurance centres in the UK are?

Answer 8

Lloyds and the International Underwriting Association of London.

Question 9

What does LUC stand for?

Answer 9

London UW Centre