The Purpose of Reinsurance Companies

As a means of risk management, insurance companies will insure some or all of their cases against loss. This is done not only in times of economic crisis, but as a routine to help defray loss due to loss of premiums or high payouts to insured customers. It is, in short, insurance for insurance companies. Ultimately, reinsurance spreads risk so that each company doesn’t have to absorb loss independently. Loss is absorbed upward throughout the chain of reinsurance companies.

Benefit of Reinsurance with Global Disasters

With the advent of the recent earthquake in Japan, as well as other disasters in recent times, many insurance companies would have gone under because of the sheer number of claims due to damage and loss of life. Reinsurance allows that loss to be spread over a bigger economic resource. Given the high numbers of global disasters lately, even reinsurers are struggling, meaning there’s a general loss at this time. On the brighter side, there are times when reinsurance calculates a gain instead of loss.

Movers and Shakers in Reinsurance Companies

Industry leaders are those who are most often seen in the news and whose information peers and customers alike seek. Names like Wilton Re, a newcomer to reinsurance, make headlines that capture major attention in the public as well as the industry. Willis Reinsurance has made news lately due to a pending expansion and acquisition of a major South African company. Gen Re is a name often found in dealings concerning reinsurance worldwide.

The Future of Reinsurance Companies

Given the current economic status, as well as recent events, it appears that bringing in new business models may mean the difference between success and failure for many reinsurance companies. Unfortunately, there are no soothsayers in the industry, but a company that plans for downward trends is one more likely to survive in even the most difficult times. The need for reinsurance companies will always be high, so the market and demand for such services are in no danger.

Reinsurance Companies Obtain Reinsurance

There are times when a reinsurance company chooses to become insured by retrocessionaires. The purpose, again, is to ease the burden of unexpected or circumstantially determined claims that could burden the reinsurer. These arrangements are typically done either short- or long-term, depending on the circumstances. The burden falling on retrocessionaires, or reinsurers for reinsurers, becomes evident when catastrophes arise that affect many insurance companies.

Reinsurance companies provide the much-needed financial backup not only in instances of catastrophe, but in the normal course of business. The success or failure of the reinsurer can affect many insurance companies as well as individuals who hold policies in the agreements. For the typical individual holding an insurance policy, the reinsurance company remains unseen for the most part. For those in the business of insurance, they’re indispensible and rarely make a move without reporting it.