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Tuesday, December 7, 2010

Reinsurance Guru

Reinsurance Guru:

"reinsuranceGuru is a leading source of agenda-setting insight for the international reinsurance practitioner. It provides links to sources of fast-moving news, commentary, trends and analysis about the treaty and facultative reinsurance industry worldwide."

Wednesday, December 1, 2010

Reinsurance - Wikipedia, the free encyclopedia

Reinsurance - Wikipedia, the free encyclopedia

Reinsurance is insurance that is purchased by an insurance company (insurer) from another insurance company (reinsurer) as a means of risk management, to transfer risk from the insurer to the reinsurer. The reinsurer and the insurer enter into a reinsurance agreement which details the conditions upon which the reinsurer would pay the insurer's losses (in terms of excess of loss or proportional to loss). The reinsurer is paid a reinsurance premium by the insurer, and the insurer issues thousands of policies.

For example, assume an insurer sells one thousand policies, each with a $1 million policy limit. Theoretically, the insurer could lose $1 million on each policy – totaling to $1 billion. It may be better to pass some potential risk to a reinsurance company (reinsurer) as this will minimize the insurer's risk.

There are two basic methods of reinsurance:

1.Facultative Reinsurance is specific reinsurance covering a single risk. The reinsurer is reinsuring one insured on a specific policy. Each facultative risk is submitted by the insurer to the reinsurer.
2.Treaty Reinsurance is a method of reinsurance requiring the insurer and the reinsurer to formulate and execute a reinsurance contract. The reinsurer then covers all the insurance policies coming within the scope of that contract. There are two basic methods of treaty reinsurance:
Quota Share Treaty Reinsurance, and
Excess of Loss Treaty Reinsurance.
In the past 30 years there has been a major shift from Quota Share to Excess of Loss in the property and casualty fields.

Glossary of Reinsurance Terms

Glossary of Reinsurance Terms:

"Admitted Reinsurance - A company is “admitted” when it has been licensed and accepted by appropriate insurance governmental authorities of a state or country. In determining its financial condition a ceding insurer is allowed to take credit for the unearned premiums and unpaid claims on the risks reinsured if the reinsurance is placed in an admitted reinsurance company.

Arbitration Clause - Language providing a means of resolving differences between the reinsurer and the reinsured without litigation. Usually, each party appoints an arbiter. The two thus appointed select a third arbiter, or umpire, and a majority decision of the three becomes binding on the parties to the arbitration proceedings.

Attachment Point - The dollar amount under an excess of loss reinsurance contract at which a ceding (primary) insurer's retention requirements have been met, and the point at which the reinsurance will respond to a loss.
Bordereau (plural Bordereaux) - A form providing premium or loss data with respect to identified specific risks which is furnished the reinsurer by the reinsured.

Burning Cost - A term most frequently used in spread loss property reinsurance to express pure loss cost or more specifically the ratio of incurred losses within a specified amount in excess of the ceding company’s retention to its gross premiums over a stipulated number of years."