Page 141 - Reinsurance Management IC85

Reinsurance Management

vii) Inflation. If the company does not consider
inflation aspect into their retention calculations the
companies’ retention levels will be low, there by
exposing reinsurer to more number of losses.

viii) State of market. In periods of hard market the
companies will be forced to retain more risk.

ix) Legal imposition. It would be made mandatory
by the individual country regulators to cede certain
amount of risk to reinsurer irrespective of any
other factors.

Q7. Outline the need for and functions of
Reinsurance.

Ans: The needs and functions of reinsurance are:
i) Increasing insurer’s capacity to handle large risks,
which he would not normally bear because of
financial capacity.

ii) Enhancing ability to accept large lines than his
capital can allow. This is even truer when insurer

Sashi Publications - www.sashipublications.com 139

ight@ The Insurance Times. 09883398055 / 0988338