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RE-INSURANCE

Insurance
What Is Insurance?
Insurance is a tool by which fatalities of a small number are compensated out of funds collected from the insured. Insurance

companies pay back for financial losses arising out of occurrence of insured events, e.g. in personal accident policy the insured event is death due to accident, in fire policy the insured events are fire and other natural calamities. Hence, insurance is a safeguard against uncertainties. Insurance, essentially, is an arrangement where the losses

experimented by a few are extended over several who are exposed to similar risks. Insurance is a protection against financial loss arising on the

happening of an unexpected event. The fixed amount of money paid by the insured to the insurance company regularly is called premium. Insurance company collects premium to provide security for the purpose. Insurance is an agreement or a contract between the insured and the Insurance Company (Insurer).

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Brief History Of Insurance


Marine insurance is the oldest form of insurance followed by life insurance and fire insurance. The history of insurance can be traced back to the early civilization. As civilization progressed, the incidence of losses started increasing giving rise to the concept of loss sharing. The Aryans through their village co-operatives practiced loss of profit insurance. The code of Manu indicates that there was a practice of marine insurance carried out by the traders in India with those of Sri Lanka, Egypt and Greece. The earliest transaction of insurance as practiced today can be traced back to the 14th century A.D. in Italy when ship were only being covered. This practice of Marine Insurance, gradually spread to London during 16th century. The history of Marine Insurance is closely linked with the origin and rise of the Lloyds ship-owners. Marine traders, who used to gather at Lloyds coffee house in London, agree to share losses to goods during transportation by ship.

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Types Of Insurance
Insurance occupies an important place in the modern world because the risk, which can be insured, have increased in number and extent owing to the growing complexity of the present day economic system. It plays a vital role in the life of every citizen and has developed on an enormous scale leading to the evolution of many different types of insurance. Broadly, insurance may be classified into the following categories:

Classification On The Basis Of Nature Of Insurance:


Life Insurance Fire Insurance Marine Insurance Social Insurance Miscellaneous Insurance Classification From Business Point Of View: Life Insurance General Insurance

Classification From Risk Point Of View:


Personal Insurance Property Insurance Liability Insurance Fidelity Guarantee Insurance

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Re-Insurance
Introduction:
The term Reinsurance, also termed as insurance of insurance. Means that an insurer who has assumed a large risk may arrange with another insurer to insure a proportion of the insured risk. In other words, in the event of loss, if it would be beyond the capacity of the insurer than this reinsurance process is restored to. In reinsurance, therefore, one insurer insures the risk which has been undertaken by another insurer. The original insurer who transfers a part of the insurance contract is called the reinsured and the second insurer is called the reinsurer. Of course the reinsurance has to pay reinsurance premium for risk shifted. For example, a man wishing to insure his premium for 10 lakhs goes to an insurance company, which will accept the risk if it is satisfied as to the condition of the property. But if it its own limit is probably Rs 5 lakhs, it will arrange with another company to reinsure or to take up so much of the risk as exceeds its limits, i.e. Rs 5 lakhs, so that if the house is burnt down the original insurer would pay the owner Rs 10 lakhs. But they would be recouped 5 lakhs, by the reinsurance offices. To be effective, the reinsurance policy must be formulated after carefully considering all aspects of the situation to which it is to be applied.

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Definition
Reinsurance is a transaction in which one insurer agrees, for a premium, to indemnify another insurer against all are part of the loss that insurer may sustain under its policy or policy or policies of insurance. The company purchasing reinsurance is known as the ceding insurer: the is company known selling as the

reinsurance

assuming insurer, or, more simply, the reinsurer. Reinsurer can also be described as the insurance of insurance companies Reinsurance provides reimbursement to the ceding insurer for lasses covered by the reinsurance agreement. It enhances the fundamental objectives of insurance to spread the risk so that no single entity finds itself saddled with a final burden beyond its ability to pay. Reinsurance can be acquired directly from a reinsurance intermediary.

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Objectives Of Re-Insurance
Insurer purchases reinsurance for essentially four reasons: To limit liabilities on specific risks To stabilize loss expanses To protect against catastrophes; and To increase capacity. Different types of reinsurance contract are available in the market commensurate with the ceding companys goals.

Limiting liability: By providing a mechanism in which companies limit loss exposure to levels commensurate with net asset, reinsurance companies allows insurance companies to offer coverage limits considerably higher than they could otherwise provide. This function of reinsurance is crucial because they allow all companies, large and small, to offer coverage limits to meet their policyholders needs. In this manner, reinsurance provides an avenue for small-to-medium size companies to compete with industry giants. A companys retention may range from a few lakhs rupees to thousands of crores. The reinsurer indemnifies the loss exposure above the retention, up to the policy limits of the reinsurance contract.

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Stabilization:
Insurance often seeks to reduce the wide swing in profit and loss margins inherent to the insurance business. These fluctuations result, in part, from the unique nature of insurance, which involves pricing a product whose actual cost will not be known until sometime in the future.

Catastrophe protection:
Reinsurance provides protection against catastrophe loss in much the same way it helps stabilize an insurers loss experience. Insurer uses reinsurance to protect against catastrophes in two ways. The first is to protect against catastrophic loss resulting from a single event, such as the total fire loss of large manufacturing plant. However, an insurer also seeks reinsurance to protect against the aggregation of many smaller claims, which could result from a single event affecting many policyholders simultaneously, such as an earthquake as a major hurricane. Though the careful use of reinsurance, the descriptive effect catastrophes have on an insurers loss experience can be reduced dramatically.

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Increased capacity:
Capacity measures the rupee amount of risk an insurer can assume based on its surplus and the nature of the business written. When an insurance company issues a policy, the expenses associated with issuing that policy-taxes, agents commissions, administrative expenses-are changed immediately against the companys income, resulting in a decrease in surplus, while the premium collected must be set aside in an unearned premium reserved to be recognized as income over a period of time. While this accounting procedure allows for strong solvency regulation, it ultimately leads to decreased capacity because the more business an insurance company writes, the more expenses that must be paid from surplus, thus reducing the companys ability to write additional business.

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Origin & Development Of Re-Insurance


In the years 1871 to 1873, no less than twelve independent reinsurance institutions were founded in Germany, of which very few survive today. The pressure of competition led to unwholesome practices, and soon many of these newly formed companies found themselves in dire straits. In branches of insurance, other than fire insurance, we find no definite tendency in the '70's toward the establishment of separate reinsurance facilities in Germany. In 1846, the first independent reinsurance company was founded in Germany, the Cologne Reinsurance Company. This was the idea of Mevissen. He held that an independent reinsurance company would be no competitor of the direct-writing companies and that it was certain to be welcomed by and to receive a good volume of business from those companies.

Fundamentals
In the most widely accepted sense, reinsurance is understood to be that practice where an original insurer, for a definite premium, contracts with another insurer (or insurers) to carry a part or the whole of a risk assumed by the original insurer. By insurers we mean all persons, partnerships, corporations, associations, and societies, associations operating as Lloyd's, inter-insurers or individual underwriters authorized by law to make contracts of insurance. We may define insurance as an agreement by which one party, for a consideration, promises to pay money or its equivalent, or to do an act valuable to the insured, upon the happening of a certain event or upon the destruction, loss or injury of something in which the other party has an interest. The insurance business is the business of making and administering contracts of insurance.
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Risks carried by the insurer


The need for reinsurance arises out of the fact that a first or primitive insurer bears two distinctly different major risks: (1) The risk that the events insured against will happen among a number of homogeneous risks; (2) The risk that certain events insured against will happen among a heterogeneous group of risk to one or several insured entitled by contract to an exceptional payment in money or its equivalent, or entitled to exceptional, costly service.

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Importance Of Re-Insurance
To protect against large claims. For example, in the case of a fire in a large oil refinery or a large city hit by an earthquake, insurers will spread the risk by reinsuring part of what they have agreed to insure with other reinsures so that the loss is not so severe for any one insurer.

To avoid undue fluctuations in underwriting results. Insurers want to ensure a balanced set of results each year without peaks and troughs. They can therefore get reinsurance which will cover them against any unusually large losses. This keeps a cap on the claims the insurer is exposed to having to pay it.

To obtain an international spread of risk. This is important when a country is vulnerable to natural disasters and an insurer is heavily committed in that country. Insurance may be reinsured to spread the risk outside the country.

To increase the capacity of the direct insurer. Sometimes insurers want to insure a risk but are not able to do so their own. By using reinsurance, the insurer is able to accept the risk by insuring the whole risk and then reinsuring the part it cannot keep for itself to other reinsures. Like the direct insurance market, reinsurance usually involves specialist brokers who have expert knowledge of the market and access to reinsurance underwriters on behalf of their clients.

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Re-Insurance In India
Reinsurance in India dated back to the 1960s. After independence there was rapid development of the insurance business. With various sectors growing in the post-independence era the need for reinsuring the development work was also felt. Since reinsurance industry has negligible presence in India after independence, the domestic requirement of reinsurance was netted from mostly was foreign markets mainly British and continental. For undertaking reinsurance by Indian entities meant drain of precious foreign exchanged earned by the country. To prevent the outflow of foreign exchange, in year 1956 Indian Reinsurance Corporation, a professional reinsurance company was formed by some general insurance companies. This company started receiving the voluntary quote share cession from member companies.

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Factors Defining The Re-Insurance Industry


Selection Of Customers
In the reinsurance

industry business is acquired in two ways. One is when a customer directly approaches the reinsurance for ceding their claims and the other method is when the reinsurer gets their business from the reinsurance broker appointed by he customer. In certain parts of the world, reinsurance accepts business routed only through a reinsurance broker. The important thing to be noted here is that it is not the quantum of business generated by the reinsurer but the customer for whom they are undertaking the business. Some go that extra mile by going to their business and accordingly tailor their policies to fit their needs and business. The more the reinsurance knows about the business nature of their clients, they can serve them.

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The Quality Of Service


The quality of services offered by the reinsurer to their customers matter a lot in the reinsurance industry. Most customers go for reinsurance for extra benefits like expertise, experience, and the advisory role of the insurer. If these services cannot meet customers expectations, then the reinsurance company can expect a rundown of their businesses by which the customer will shift base to the other players providing better services. It is to be remembered that the reinsurance industry is a highly competitive market and hence the reinsurance needs to carefully grade its customer.

The Skill Set


The skill set of the reinsurance is the most important aspect of a contract to the customer. It matters a lot to a reinsurance too because a skill set represent the basic amour which it can showcase to its costume. The skill set generally refers to the underwriting, financial, actuarial, claims management and last but not the least management skills which it can serve its clients. Hence the reinsurance gives due consideration to its available skill set and sees how best it can serve the client with such skills. Thus reinsurer who takes risk in the hope of gaining the premium volume ceded to him, as part of a contract, would like to reap the benefits over a period of time and hope for a long-term relation with its customers.

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Why Re-Insurance?
Risk managers and other buyers of insurance rarely think about how reinsurance affects their company or the insurance they purchase for their company. Insurance buyers mainly focus on the direct insurers the primary, excess, and umbrella carriers that provide the coverage. Smart insurance buyers look for A--rated or better insurance companies with long histories. Other buyers rely on their brokers to put together the best quality insurance program with the best insurance security available. After all, the insured must rely on the insurance policy issued by the direct insurer. But what stands behind the A--rated carrier or the high quality program for a complex risk? The answer is Reinsurance. Commercial insurance cannot exist without reinsurance. The quality of the reinsurance security purchased by the direct insurer is what helps to insure that loss will be paid. Quality reinsurer provides special expertise to their direct insurer client and assists the direct insurer in providing the best possible protection and risk management for the direct insurers own client.

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Functions Of Re-Insurance
There are many reasons why an insurance company would choose to reinsure as part of its responsibility to manage a portfolio of risks for the benefit of its policyholders and investors :

Risk Transfer
The main use of any insurer that might practice reinsurance is to allow the company to assume greater individual risks than its size would otherwise allow, and to protect a company against losses. Reinsurance allows an insurance company to offer higher limits of protection to a policyholder than its own assets would allow. For example, if the principal insurance company can write only $10 million in limits on any given policy, it can reinsure (or cede) the amount of the limits in excess of $10 million. Reinsurances highly refined uses in recent years include applications where reinsurance was used as part of a carefully planned hedge strategy.

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Income Smoothing
Reinsurance can help to make an insurance companys results more predictable by absorbing larger losses and reducing the amount of capital needed to provide coverage.

Surplus relief
An insurance company's writings are limited by its balance sheet (this test is known as the solvency margin). When that limit is reached, an insurer can stop writing new business, increase its capital or buy "surplus relief" reinsurance. The latter is usually done on a quota share basis and is an efficient way of not having to turn clients away or raise additional capital.

Arbitrage
The insurance company may be motivated by arbitrage in purchasing reinsurance coverage at a lower rate than what they charge the insured for the underlying risk.

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Types Of Re-Insurance
There are two kinds of reinsurances, treaty reinsurance and facultative re-insurance. Treaty Re-Insurance: This kind of reinsurance requires that the reinsurer will assume part or all of a ceding companys responsibility for certain sections or classes of business in accordance with the terms of the policy. It is an obligatory contract as the ceding company has to cede the business and the reinsurer is obliged to assume the business as per the treaty. It is the preferred type of reinsurance when groups of homogenous risks are considered.

Facultative Re-Insurance: This kind of reinsurance is used while considering a particular underlying risk of an individual contract. It is the reinsurance of all or part of a single policy after the terms and conditions have been negotiated. It reduces the ceding companys exposure to risk from an individual policy. It is non- obligatory.

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In another way, reinsurance is classified as proportional and nonproportional reinsurances.

Proportional Re-Insurance
The two companies share the premium as well as risk. The reinsurer usually pays a ceding commission. Pro-Rata Re-Insurance: It is a classification based on the way the two companies share the risk. The cedent and the reinsurer share a pre decided percentage of the premium and losses. It is used widely as it provides surplus protection. There are two types of pro-rata reinsurance, quota share and surplus share.

Quota Share Pro-Rata Re-Insurance: The primary insurer cedes a fixed percentage of premiums and loses for every risk accepted. Surplus Share Pro-Rata Re-Insurance: It is different in that not every risk is ceded but only those that exceed certain predetermined amounts.

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Non-Proportional Re-Insurance:
As the name suggests it is not proportional and the reinsurer only responds if the loss suffered by the insurer exceeds a certain amount. Excess Of Loss: It covers a single risk or a certain type of business. Catastrophe reinsurance is a type of excess of loss reinsurance. It provides the captive with a great deal of flexibility. Stop Loss Re-Insurance: It covers the whole account and is also known as excessive loss ratio reinsurance. These are the various types of reinsurances. There are firms that offer their services as well as their products to help new business start up flourish and succeed.

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Re-Insurance Underwriting
Reinsurance underwriting is the process of building up a portfolio of assumed risks; ii involves selecting the accounts and defining the conditions/rates at which the accounts are to be accepted for assumption of risk. It is one of the most vital functions of the management and the ultimate results of the company depend upon the efficacy. Underwriting being a function of such vital importance holds the key to the success of an organization. History is witness that very rarely has a reinsurance company got into difficulties due to a poor investment decision but a major underwriting loss can critically impair the company and throw it out of business.

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Designing A Re-Insurance Program


Having decided a particular class and amount of business to be involved in, a company must decide some form of reinsurance which it requires. Basically the facultative form is more cumbersome, timeconsuming and also more expensive. As such it is always wiser to consider a suitable combination of treaties. The ultimate choice as regards a particular treaty or a combination of treaties would depend upon whether the portfolio is exposed to large individual losses or accumulation of losses from sporadic, isolated events. Apart from the above, other considerations that have a bearing on a company's choice of portfolio are: Administrative costs and ease of operations. Effect on company's net retained premium income Whether insurers. In case of large risks on classes of business such as Fire, Engineering, Marine hull, etc., a surplus treaty would be the best option for the cedent company as it would enable retention of a large part of premium income. While arranging for reinsurance, a company must concentrate on good security of the reinsurer. Good security amounts to power of withstanding any large risk and not the offer of large commissions and lower premium rates. Similarly, the reinsurer also judges whether the cedent company is worth entering into a contract with. it wishes to have reciprocal arrangements with other

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Re-Insurance Regulations
As recently as fifteen years ago, reinsures accounting requirements were minimal and were addressed in the space of two or three pages in the regulation books. Since that time, reinsurance regulatory oversight has increased significantly. The areas in which these increases have been found include: Disclosure Risk Transfer Assessment & Accounting and; Security This increased regulation has resulted from the regulators realization that the solvency of primary insurers often depends on their ability to collect under their reinsurance agreements. Since primary insurers cede more than $50 billion in premiums in any given year to reinsures, the ability to collect under reinsurance agreements is a very serious issue. Several natural catastrophes occurred during the decade of the 1990s that caused many to fear the imminent collapse of the reinsurance industry. Even Lloyds of London would have difficulty meeting its obligations. Due to these natural disasters and the growing concern about reinsures financial stability, the Financial Accounting Standards Board has tightened generally accepted accounting principles (GAAP) for reinsurance transactions.

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Disclosure
The first area to feel the increase in regulatory oversight is disclosure.

The required additional disclosure permits regulators to perform a more extensive analysis of a primary insurers reinsurance programs and a more thorough evaluation of its exposure to additional risk in the event any of its reinsures fail to fulfill their contractual obligations. Schedule F in the NAIC Annual Statement provides a detailed disclosure of information regarding the insurers reinsurance. All of the information on the ceded business can be found there. This schedule was greatly expanded in 1992 to include eight separate parts.

Assessment of Risk Transfer & Accounting


In additional to substantially increased disclosure requirements, the NAICs Accounting Practices and Procedures Task Force has modified the NAICs accounting guidance. The Accounting Practices and Procedures Manual identify the essential ingredient of a reinsurance contract as the transfer of insurance risk. This element of insurance risk transfer is essential because it enables a reinsurance contract to qualify for loss reserve credit, and this credit is an important financial consideration. The manual goes on to state that investment risk is not an element of insurance risk. The result of this requirement that there be an insurance risk is to curb a practice that the insurance regulators consider a misuse of reinsurance contracts. However, the regulators have used changes in accounting requirements rather than regulatory restraint to bring about the change.
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Security
Heightened regulatory oversight is primarily the result of concern about the financial soundness of reinsurers. This heightened oversight is intended to assure that reinsurance assures security. Under the law, if security is not deemed to exist, then a credit for reinsurance against loss reserves is not allowed the ceding company. The effect on the ceding company in the event that security is not seen to exist is a charge against its surplus. Since surplus is the vital ingredient in an insurers ability to write business, this is a significant issue. Security is not deemed to exist if: The reinsurer is not authorized or accredited and The reinsurance from the unauthorized insurer is not secured by funds withheld, trust funds or letters of credit The result of this increased regulatory oversight is a much increased security for primary insurer and, ultimately, for their policy owners.

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Re-Insurance: The Indian Scenario


The Indian reinsurance industry is characterized by development of a market reinsurance Programme, which influences the working of Indian business entities and the way they do reinsurance. The chief features are as follows: To achieve maximization of the retention capacity within the country. Retention of the domestic insurers to be achieved through obligatory cessions, pools, etc. To protect inter-company and individual retentions by providing them with excess of loss covers. To make provisions, wherein different classes of business can be ceded to treaties based on quota share or surplus basis. To make most of the outward treaties by the companies by providing automatic covers and restore facultative reinsurance in few cases.

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State Re-Insurance Corporations (SRCs)


The role and importance of establishment of state reinsurance corporations was highlighted by world development organizations like UNCTAD (United Nations Conference on Trade and Development). With the encouragement received from multilateral bodies like UNCTAD many countries have established their own stale reinsurance corporations to take care of the reinsurance needs arising out of their domestic insurance industry. Many countries in Africa, Asia, including India have opened state reinsurance corporations. The main principles behind the encouragement of domestic reinsurance corporations are as follows: To Conserve Foreign Exchange: For developing countries like India, foreign exchange is a precious resource and it needs to be spent very cautiously. The setting up of these corporations will prevent draining of foreign exchange resources from the country in the form of premiums to the overseas reinsurer. To Prevent Excessive Dependence: Depending on a foreign country for reinsurance coverage for a long period of time is not advisable. Because at the times of war, especially, and political tensions, the reinsurer country may not allow the reinsurer to discharge its liability and it may drastically affect the insured's business.

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Creation Of Market Place: The setting up of state reinsurance corporation will help in developing the domestic reinsurance market and lay a strong foundation for development and growth of the domestic reinsurance industry.

To Avoid Competition: In a domestic market, where the insurance industry has not advanced on, the presence of a strong state reinsurance corporation will help prevent setting up of new reinsurance companies, betting up - of more reinsurance companies in less advanced will create wasteful and destructive forces. Better Bargaining Capacity: Presence of a single state reinsurance corporation will increase bargaining capacity of the country vis--vis internal agencies. Develop Local Market: The presences of state reinsurance corporations will help nurture the domestic reinsurance industry and develop the reinsurance skills. To encourage the growth of SRCs, many rules were implemented to ensure that SRCs get their due business and grow strongly in the market.

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The following are some of the measures: SRCs receive their business by means of statutory access by way of a certain percentage of all insurance business from domestic insurance companies. The insurance companies in the country are encouraged to voluntarily utilize the facilities and services of SRCs, apart from meeting their obligatory cessions with SRCs. Even though the provision of obligator cessions is thrust upon the domestic companies, they have the freedom to reinsure their exposures with global market players and utilize their services once they have fulfilled compulsory cessions to SRCs.

How SRCs Contain Their Exposures


When a state reinsurance corporation takes exposures of the domestic insurance companies, SRCs will be exposed to the risks of their customers from all angles. In order to prevent the havoc of running their business with heavy and bad exposures (which may occur sometimes), SRCs go in for retrocession (The method wherein a reinsurer will go in for reinsurance coverage with another reinsurance company). Thus, state reinsurance corporations may receive all the reinsurance business from local direct insurers. Even SRCs have a provision wherein they can retrocede shares out of the national pool to each company in proportion to the volume of its cession to the pool. Hence, retrocession plays an important role for working of state reinsurance corporations.

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Retrocession
Reinsurance companies themselves also purchase reinsurance and this is known as a retrocession. They purchase this reinsurance from other reinsurance companies. The reinsurance company who sells the reinsurance in this scenario are known as retrocessionaires. The reinsurance company that purchases the reinsurance is known as the retrocedent. It is not unusual for a reinsurer to buy reinsurance protection from other reinsurers. This process can sometimes continue until the original reinsurance company unknowingly gets some of its own business (and therefore its own liabilities) back. This is known as a spiral and was common in some specialty lines of business such as marine and aviation. Sophisticated reinsurance companies are aware of this danger and through careful underwriting attempt to avoid it.

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Professionalism In The Re-Insurance Industry


Running a reinsurance company is not similar to running any other business. It requires in-depth knowledge of the insurance industry apart from requiring specialized skills, proper control, and a nack to brood over statistics and devise appropriate policies to meet customer needs. Ml these have necessitated a professional approach towards the industry. With increased demand for cover and keener competition among insurance companies, specialized reinsurance companies like marine reinsurance, life reinsurance etc, emerged. For a successful growth, the reinsures realized the need to fan out across the globe and soon started seizing business opportunities wherever they existed. This thinking process led to the emergence of a professional global reinsurance industry. The last hundred years have seen tremendous industrialization the world over and with it the need and necessity to protect against various risks inherent in the business. The emergence of New York as an important financial hub apart from London and the opening of reinsurance exchanges in the USA, and setting up of new insurance centers in Bermuda, Panama, Hong Kong, Singapore and West Asia with tax concessions and easy regulatory affairs has led droves of insurance companies to set up their operations in these places. Today, it has become a norm rather than an exception in this industry to broker deals worth several billions.

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Worlds Top 10 Re-Insurers


Rank Company 1 2 3 4 5 6 7 8 9 10 Swiss Re Group Munich Re Group Hannover Re Group Berkshire Hathaway/Gen Re Group Lloyd's of London XL Re Everest Re Group Ltd. Partner Re Ltd. Transatlantic Holdings Inc. ACE Tempest Reinsurance Ltd. Net Premiums Written $27,680,199,200 $23,760,161,400 $9,661,392,406 $9,491,000,000 $6,948,466,800 $5,012,910,000 $3,972,041,000 $3,615,878,000 $3,466,353,000 $2,848,758,000

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Case Study: General Insurance Corporation


Reinsurance business in India dates hack to the 1960s. After independence there rapid development of the insurance business, hut there was negligible presence of reinsurance companies in India. Thus, the domestic requirement of reinsurance was netted mostly from foreign markets mainly British and continental. As undertaking reinsurance business by Indian companies meant huge outflow of foreign exchange and in 1956 Indian Reinsurance Corporation was established. It formed as a professional reinsurance company by some general insurance companies. The company received voluntary quota share cessions from member companies. Later another reinsurance company, the Indian Guarantee and General Insurance Co. was formed in 1961. With this set up, a regulation was promulgated which made it statutory on the part of every insurer to cede 20% in Fire and Marine Cargo, 10 % in Marine hull and miscellaneous insurance, and five percent in credit solvency business. Prior to nationalization, there were 55 non-life domestic insurers and each company had its own reinsurance arrangement. After nationalization, all these companies were brought under the agents of General Insurance Corporation and four subsidies were formed, with GIC as the holding company. With this backdrop, it has been a quantum jump for the Indian reinsurance market, with GIC being established as the national reinsurer. Earlier insurance companies had to depend on foreign markets, but now after the IRDA Act has been passed, GIC has focused on competing with the best in the world.

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GICs reinsurance business can be divided into two categories; domestic reinsurance and international reinsurance. On the domestic front, GIC provides reinsurance to the direct general insurance companies in the Indian market. GIC receives statutory cession of 20% on each and every policy subject to certain according to the current statute It leads many of domestic companies programs and facultative placements. GIC is also emerging as an international player in the global reinsurance evolving itself as an effective reinsurance solutions partner for the African region. In addition to that, it has also started leading reinsurance programmes several insurance companies in SAARC countries, South East Asia, Mid-Africa.

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