Reinsurance is
Reinsurance is "insurance for insurance companies, in other words a second level of insurance." This is the very straightforward, albeit technically not entirely accurate, explanation of our business.
The risk of suffering dangerously high losses as a consequence of payments for major claims soon generated a need for "reinsurance" among so-called "primary" insurers. The oldest known reinsurance contracts or "treaties" date back to the fourteenth century.
Principle of risk spreading
Insurers atomise large individual risks, such as building complexes, and risks stemming from natural hazards - such as earthquakes or hurricanes - in order to minimise the potential loss for their own company.
Insuring an industrial enterprise against fire, for example, could financially overstretch a single insurer if a loss were to occur. In order to reduce the risk, the insurer secures the participation of other insurers or calls on the services of a reinsurer - in case of doubt the insurer will take up both options.
Reinsurers, for their part, spread the assumed major risks among other reinsurers - transactions known as retrocessions. In this way risks are spread right across the globe. This means that our business is for the most part international. In some cases a reinsurer will accept a mere half a percent of a risk, yet the financial risk assumed will still be high.
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