Page 10 - Reinsurance Management IC85

Reinsurance Management

c. Reinsurance contracts are generally international
transactions and are considered confidential.
Disputes between the insurer and reinsurer are
normally settled out of court through arbitration.
In the case of a dispute, the domestic law of the
ceding company will apply.

Q. Outline the various functions of reinsurance and
discuss how reinsurance helps in risk sharing and
spread of risks on an international scale.
a. Increase underwriting capacity : Today, risks
with large sums insured of nearly Rs. 1,000
crores (e.g., petrochemical projects) and large
values for engineering projects, marine cargo
consignments and hulls are common. Without the
facility of a ready reinsurance market, arranging
insurance for such values will be impossible for
an underwriter or an insurance company. Thus
reinsurance provides an underwriting capacity to
accept risks of large values to an insurance
company. Indirectly it helps in promoting a
growing demand for insurance cover.

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