The main functions of a reinsurer and their relationship with insurers Flashcards

1
Q

What is reinsurance?

A

It is the business of insuring part of a risk accepted by an insurer so that the insurer can spread its exposure to claims

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2
Q

What is treaty reinsurance?

A

It is where the insurer is obliged to transfer to the reinsurer all the risks that fall within the agreed scope of the treaty and the reinsurer is bound to accept them

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3
Q

What is retrocession?

A

It is when reinsurers take out their own reinsurance, as they also need to lay off some of their exposure. In this retrocession agreement, the reinsurers are retrocessionaires

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4
Q

What is facultative reinsurance?

A

It is where the insurer requests that a reinsurer share in the risk of an individual case because the risk is too large or too unusual for the insurer to take all of it alone, or it falls outside the limits of an obligatory treaty.

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5
Q

What is proportional reinsurance?

A

It is where the insurer accepts a share of the risk and receives a proportional share of the premium.

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6
Q

What is non-proportional reinsurance?

A

It is where the level of premium is not proportional to the overall risk accepted or the potential loss.

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7
Q

What is co-insurance?

A

This involves risk being shared between a number of insurers. This is done to maximise the capacity available and obtain the highest catastrophe limit possible. For each share of the risk, the insurers involved will apply their own pricing basis and policy terms to the risk.

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