Reinsurance basics

Reinsurance occurs when multiple insurance companies share risk by purchasing insurance policies from other insurers to limit their own total loss in case of disaster. By spreading risk, an insurance company takes on clients whose coverage would be too great of a burden for the single insurance company to handle alone.

What are the three main methods of reinsurance?

Key Takeaways\n\n Types of reinsurance include facultative, proportional, and non-proportional.

What are the 4 most important reasons for reinsurance?

Several common reasons for reinsurance include: 1) expanding the insurance company's capacity; 2) stabilizing underwriting results; 3) financing; 4) providing catastrophe protection; 5) withdrawing from a line or class of business; 6) spreading risk; and 7) acquiring expertise.

What is reinsurance in simple terms?

Reinsurance is insurance for insurance companies. It's a way of transferring some of the financial risk insurance companies assume in insuring cars, homes and businesses to another insurance company, the reinsurer.