Page 43 - Insurance Times July 2022

A STUDY ON

GROWTH OF

REINSURANCE

BUSINESS DURING

COVID-19

Introduction: Reinsurance Need for reinsurance
Reinsurance is a valuable and diverse product that assists Mainly a direct insurer needs reinsurance
an insurance company in properly hedging its business risks
To be protected in case of catastrophe.
while also protecting its capital position. It has a critical role
To keep the annual fluctuations in the losses he must
in the Indian economy, and as a result, it holds a significant
endure on his account to a minimum (as much as
position in the financial markets to protect and sustain
practicable).
insurance entities.
Type of reinsurance
It is a risk-transfer mechanism in which an insurance
Reinsurance is divided into two types first is treaty
company transfers the risk of an insurance policy to a
reinsurance and second is facultative reinsurance. Treaty
reinsurer in exchange for a fee under a Reinsurance treaty
reinsurance is divided into two parts proportional treaty and
(contract). In reinsurance, one direct insurance company
non-proportional treaty.
(also known as a Ceding firm) transfers (cedes) a portion of
Types of proportional Treaty Reinsurance
the risk to another (called Reinsurer). In simple terms
o Quota Share
"Reinsurance is an insurance for the insurance companies."
o Surplus
Types of non-proportional Treaty Reinsurance
About the author
o Excess of Loss
Anushka Gupta o Excess of Loss Ratio (Stop-Loss)
Assistant Manager, Client Advisory Group,
o Pools
Alliance Insurance Brokers Pvt. Ltd.,
Mumbai - India
Insurance and reinsurance play a crucial part in support of
The Insurance Times, July 2022 43