Insurance is a cover taken by individuals or businesses to protect them against risks. Reinsurance is an arrangement wherein the insurer seeks insurance from other insurance companies who agree to secure the risk for the insurance claims that may be made. Reinsurance is also called insurance of insurance. In the case of reinsurance, the original insurer now becomes the insured.
The ceding company's money is freed up, and reinsurance helps to boost the solvency margin. It also allows the ceding firm to expand its underwriting capabilities while lowering its underwriting costs.
Reinsurance is the insurance of insurance.
* Reinsurance is an arrangement wherein one or more insurance companies agree to secure the risk for the insurance policy coverage offered by another insurance company.
* The main types of reinsurance policies are – facultative coverage reinsurance, treaty reinsurance, proportional reinsurance and non-proportional reinsurance.
Facultative reinsurance is a type of reinsurance in which the ceding business offers each risk it wants to reinsure to the reinsurer in separate single transactions. Each risk that the ceding business wants to reinsure requires the submission, acceptance, and a subsequent agreement.