Reinsurance Business

It is commonly considered that the reinsurance transfers the risk from an insurer to another party (reinsurer) the primary object being to indemnify the reinsured against loss . Reinsurance can be defined the ‘insurance of insurance’ or the ‘insurance of insurers’: an insurer buys protection against the costs of the claims it may have to meet under the policies of insurance it has itself issued. As a result, reinsurers absorb losses that are not retained by primary insurers, and in so doing they limit the earnings volatility of primary insurers. If the function of an insurance firm is to provide protection to the original insured against potential heavy losses, the reinsurer provides similar protection to the insurance company. In this way, reinsurance business plays an important role in the insurance market by providing capacity, creating stability and strengthening finances.