Reinsurance
Reinsurance is a term used when an insurance company protects itself against insurance risk by utilizing the services of another insurance company. There are many reasons why insurance companies make reinsurance. The distribution or spread of risk is one reason for reinsurance.
If the insurance company believes that the insurance value of a premium is greater than the value that can be borne, then he can divide the risks faced by insuring back part of that value to other companies (reinsurance companies). With this reinsurance, insurance companies basically have to protect the stability of their income levels because reinsurance has protected it from the potential for large losses. Another reason is to gain profit as an intermediary by reinsuring the reinsurance company with a premium that is lower than the premium level the insurance company is imposing on its customers.
There are two types of reinsurance, namely proportional and non-proportional reinsurance. Proportional reinsurance is reinsurance in which the reinsurance company takes the risk of claim proportionally based on the claim. For example, if there is a proportional reinsurance agreement between the insurance company and a reinsurance company of 40%, then if there is a claim from the policyholder then the insurance company only needs to spend 60% of the total claim, while the remaining 40% of the claim will be borne by the reinsurance company . For non-proportional types of reinsurance, usually the reinsurance company will bear claims above the maximum limit that can be borne by the insurance company. For example if an insurance company and a reinsurance company have made an agreement to bear claims above the one billion limit, then if there is a claim of 800 million, the insurance company will bear all the claims submitted. Conversely, if there is a claim of four billion, the insurance company only bears according to the agreement, which is one billion and the rest will be borne by the reinsurance company.
Almost all reinsurance companies involve more than one reinsurance company, this is related to the spread of risk. Reinsurance companies that determine contract conditions and reinsurance premiums are called lead insurers, while other reinsurance companies that take part in the contract are called following reinsurance agents.
There are two types of reinsurance, namely proportional and non-proportional reinsurance. Proportional reinsurance is reinsurance in which the reinsurance company takes the risk of claim proportionally based on the claim. For example, if there is a proportional reinsurance agreement between the insurance company and a reinsurance company of 40%, then if there is a claim from the policyholder then the insurance company only needs to spend 60% of the total claim, while the remaining 40% of the claim will be borne by the reinsurance company . For non-proportional types of reinsurance, usually the reinsurance company will bear claims above the maximum limit that can be borne by the insurance company. For example if an insurance company and a reinsurance company have made an agreement to bear claims above the one billion limit, then if there is a claim of 800 million, the insurance company will bear all the claims submitted. Conversely, if there is a claim of four billion, the insurance company only bears according to the agreement, which is one billion and the rest will be borne by the reinsurance company.
Almost all reinsurance companies involve more than one reinsurance company, this is related to the spread of risk. Reinsurance companies that determine contract conditions and reinsurance premiums are called lead insurers, while other reinsurance companies that take part in the contract are called following reinsurance agents.
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