Reinsurance Companies Flashcards
_______ are insurance companies that operate to accept all or a portion of the financial risk of loss from the primary (or “ceding”) insurance company.The risk of loss is shared with one or more insurance companies. All contractual obligations are on the original (primary) company and consumers have no direct contact with the actual companies.
This is what makes insurance affordable. No single insurance company is exposed to 100% of the losses it insures. When claims are paid by the insurer to the consumer, the actual source of the funds may come from both the insurer and their reinsurer but the consumer will not know how much came from each.
Reinsurance Companies
Types of reinsurance agreements:
_____– Reinsurance agreement that automatically accepts all new risks presented by the ceding insurer (the company seeking or requesting the reinsurance from the reinsurer).
Treaty
_____- Reinsurance agreement that allows the reinsurance company an opportunity to reject coverage for individual risks, or price them higher due to their substandard (higher risk) nature.
Facultative
Independent _____ evaluate and rate the claims paying ability and financial stability of insurance companies. These firms assign letter ratings that indicate the financial strength of each company which may be based on both public and nonpublic data.
The higher the rating the opinion is that the insurer has a higher likelihood of the ability to pay claims. The lower the rating the opinion is that the insurer is less likely of being able to pay claims. The ratings are made available to the public, though insurers may purchase reprints of their ratings for use as marketing tools.
Financial Rating Services
Producers are responsible for placing business with insurers that are financially sound. Examples of _____ include: A.M. Best Company, Standard &Poor’s, Moody’s Investment Services, Weiss Insurance Rating, and Fitch Ratings.
Financial Rating Services
