FACULTY OF INSURANCE AND SOCIAL SECURITY
POSTGRADUATE DIPLOMA IN INSURANCE AND RISK MANAGEMENT (PART TIME)
CC 400 D; RESEARCH METHODOLOGY
The Role of Insurance, co – insurance and reinsurance to the society
1. ALICE NEEMA J SARIA IRM- PT/11/49901
2. SUSAN MASOYIRM- PT/11/49915
3. FLORENCE SEBUYOYA IRM- PT/11/49885
4. MGHOSI ERICK SHAO IRM- PT/11/59903
5. EVELYNE R MUHETOIRM- PT/11/48379
This assignment is presented to address the role of insurance, re-insurance and co-insurance in a society. It is organized in a topical format so as to exploit and appreciate in detail the role that each of the three concept plays in a social and economic development of the society. We will start by exploring the role of the insurance in general, followed by reinsurance and finally we will analyze the role of coinsurance. We will give concluding remarks in each on each of the subsection.
C. RE - INSURANCE:
Re – Insurance: The Concept
Reinsurance is a financial transaction by which risk is transferred (ceded) from an insurance company (cedant) to a reinsurance company (reinsurer) in exchange of a payment (reinsurance premium).Providers of reinsurance are professional reinsurers which are entities exclusively dedicated to the activity of reinsurance. Also in most jurisdictions insurance companies are allowed to participate in reinsurance. The terms of a reinsurance transaction are defined in a reinsurance treaty. Due to the complexity of reinsurance treaties it is not uncommon that the definitive treaties are only signed months after the risk transfer took place. To document the acceptance of the risk, a short version of a treaty call a slip containing the most important terms of the agreement is used instead. Slips are signed before the risk is transferred and accepted by the reinsurer. Some jurisdictions are requiring signed treaties before the risk is transferred. Reinsurance transactions or agreements arise when an original Insurer decides that it has more Insurance risks than it wishes to retain in its portfolio and then transfers a portfolio of its risks to other Insurance Companies. Reinsurance is one of the tools used to manage risk by insurance companies. Unlike insurance which protects individuals and non insurance corporate firm from financial loss, reinsurance protects the insurance company from financial loss. It offers an insurance company protection by spreading risk among several insurance companies in a pool that agrees to back the policies sold by the company. This enables an insurance company to cover more individuals without fear of incurring significant financial loss should a disaster occur, resulting in multiple policyholders filing claims at one time. Reinsurers can also transfer risks to other entities called retrocessionaires, by means of a financial transaction similar to reinsurance called retrocession. Professional retrocessionaires are expected to keep and not to transfer the assumed risk to other entities. In this manner reinsurers and insurers that do accept risks not individually identified can be sure that they will never assume part of the risk they had already transferred.
Types of Reinsurance Agreements
Reinsurance contracts can either take a form of automatic treaty or facultative. Below is a brief description of each: 1. Treaty reinsurance
Under a treaty reinsurance arrangement all risks that are defined to be object of the agreement are ceded automatically to the reinsurer, and the reinsurer agrees to accept all those risks. Treaty reinsurance allows the cedant to act in an independent and fast reacting way when accepting risks that fall under the object of the reinsurance agreement. In treaty reinsurance the acceptance of the risk by the reinsurer together with all financial conditions has already been...