Talk:Reinsurance
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I get the concept of reinsurance but I think this article is written to the expert, not to the uninformed generalist. Perhaps some simpler examples, diagrams would help. I'm willing to work with someone who understands the concept to make sure it is clear for the beginner, I just don't want to edit and foul it up. I'm watching this, or leave a message on my talk page.
Cliffb 02:25, September 10, 2005 (UTC)
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[edit] Possible Reinsurance Preface
Would this work, or do you feel it needs to be more general still? It's surprisingly difficult to write generally without being insulting to the intelligence of the audience. :-)
Reinsurance is the means by which an insurance company (called the reinsured, ceding company or cedant) shares the risk of loss with another insurance company (called the reinsurer). There are many reasons an insurance company will choose to buy reinsurance, but the five major reasons an insurance company may wish to transfer all or part of a risk of loss are:
1st) Reinsurance allows an insurance company to offer larger limits of protection to a policyholder. If an insurance company can safely write only $5 million in limits on any one policy, it can reinsure (or cede) the amount of the limits in excess of $5 million to reinsurers.
2nd) Reinsurance helps to make an insurance company’s results more predictable, aiding in short range and long range forecasting.
3rd) Reinsurance enlists the expertise of other underwriting, actuarial and claims departments in analyzing new lines of business or unusual risks.
4th) Reinsurance can provide surplus relief. Surplus is roughly the same as shareholder’s equity on a balance sheet. Because of the nature of insurance regulation, insurance accounting must pro-rate premium earned over the course of a policy term, while the expenses associated with writing the policy are entirely recorded at the beginning of the policy. This reduces surplus. If a reinsurer provides a commission to the ceding company, the commission will offset the expenses. This is surplus relief.
5th) Reinsurance makes it possible for an insurance company to withdraw from a market without abandoning its policy holders.
Risks of loss can be transferred via a reinsurance treaty wherein the ceding company transfers a large segment of it business to a reinsurer. The terms and conditions of the transfer are agreed to in a treaty contract. Before agreeing to underwrite a treaty, the reinsurer will assess the skills and profitability of the ceding company.
Risks of loss can also be transferred one policy at a time via a facultative certificate. Before agreeing to underwrite a certificate, the reinsurer will assess the risk of the one policy.
Finally risks of loss can be transferred after an insurance company reaches the level of loss it is willing to assume for any given year. These contracts are commonly called Stop Loss contracts.
Facultative Certificates and Reinsurance Treaties can both be written on a quota share (or proportional basis) or as excess of loss (or non-proportional basis). In proportional reinsurance, the ceding company retains a percentage of each and every risk and cedes the remaining percentage. In non-proportional reinsurance, the ceding company retains the first dollars of each risk and cedes the amounts in excess of a pre-determined dollar amount. As in any insurance contract, there are limits of coverage placed on all treaties and facultative certificates.
Astrochess 15:42, 25 September 2005 (UTC)
[edit] Arbitrage
I agree that reinsurance can be obtained at less than they charge for the original coverage. That is not arbitrage, that is good business sense. It doesn't seem like a good idea to charge less for something than you have to pay to get it yourself.
Arbitrage, on the other hand, is where they believe it will cost them x, but a reinsurer is prepared to accept y (which is less) for that same risk. That is arbirtrage because it's about finding discrepancies in the market and taking advantage of it.
193.134.170.35 12:05, 21 February 2006 (UTC)
[edit] Reinsurance companies and markets
Do we really need this list? we already have Category:Reinsurance companies, and this is beginning to both look like and attract linkspam. I am removing them for now, -- Avi 20:44, 15 June 2006 (UTC)
[edit] Catastrophe Bonds link
This should link to the Catastrophe_bond page which does exist. i don't know how to do this though.
[edit] Fair Use?
The link provides a list of the largest reinsurance companies (Well, in 2005. Swiss Re's acquired GE IS). What does the copyright say about using that table verbatim? Parts of it? http://www.managedcareinfo.com/worldslargestreinsurancebrokers2005.htm
