ReInsurance

Reinsurance is a means by which an insurance company can protect itself with other insurance companies against the risk of losses. Individuals and corporations obtain insurance policies to provide protection for various risks (hurricanes, earthquakes, lawsuits, collisions, sickness and death, etc.). Reinsurers, in turn, provide insurance to insurance companies. Reinsurance is insurance purchased by insurers from other insurers to limit the total loss an insurer would experience in case of a disaster. Ordinarily, the business owner has little to be concerned with when it comes to reinsurance. However, recent events, such as the War in Iraq, the rise of terrorism, and recent natural disasters, have made it difficult for insurers to secure reinsurance and, as a result, insurers have left the market in some states or premiums for certain types of insurance have risen to an all-time high. Reinsurance is an international, multi-billion dollar industry that is vital to the financial stability of all types of insurance company. It enables insurance companies worldwide to provide insurance against risks that they otherwise would not be able to accept safely. It operates by transferring to another insurer (known as a reinsurer) some of the liabilities accepted under the insurance contracts an insurer has written. There are many facets to the subject. A full understanding of sound reinsurance practicerequires a knowledge of the various forms of reinsurance contract, the law relatingthereto, how contracts are underwritten and the markets for reinsurance business.However, it is not a static subject. Like most financial services, reinsurance has been subject to many changes in recent years, in response to economic, environmental,political, technological, legal and other developments. Such changes explain the emergence of alternative risk carriers and products have been developed to compete with and complement traditional reinsurance products as risks, especially catastrophe risks, have mushroomed in size.