Page 413 - Misc Ebook IC 78

Miscellaneous Insurance

Q8. What is Reinsurance? Which are the
different types and methods of placing the
same? Which of these will be especially
suitable for the Misc Accident Insurance and
in which situations ?

Ans. Reinsurance is the insurer's insurance. It serves to
underwrite the risk liability of an insurer in a similar way
as the insurer underwrite the liability of the insured.

The basic underlying principle is to spread the risk as
far and wide as possible. It fulfils the purpose by allowing
the insurer to restrict the size of its commitment is to
limit his maximum loss on the risk to an amount which
he can pay without seriously disturbing his financial
structure.

The maximum amount of risk that the insurer keeps on
his own account is called the retention of the insurer
with respect to the risk. The factors that govern the
determination of this limit are:
(a) nature of the risk
(b) location of risk

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