Page 111 - Reinsurance Management IC85

The Insurance Times

Reinsurance.

Ans: Coinsurance is a system whereby one insurer shares
direct responsibility for a risk with one or more
insurance companies. The company's liability is limited
to the amount it underwrites on the original policy.

The system is used especially for covering big industrial
risks and certainly has many advantages. However,
to apply it to the underwriting of thousands of medium
and small risks would only mean high administrative
costs and inconvenience.

Reinsurance is insurance of insured risks where the
primary insurer retain a part and cedes the balance
of risk to a reinsurer. This results in a greater
spread and reduced liability on the part of the
original insurer. Reinsurance is the foundation on
which the whole edifice of insurance rests.

Q. List out the I.R.D.A. regulations
containing main objectives of a
reinsurance programme.

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