Page 190 - Reinsurance Management IC85

The Insurance Times

Q5. a)What are the advantages of reinsurance,
to an insurance Company?

b) Why is it important to place reinsurance
with a well rated reinsurer?

Ans: a. The advantages of the protection afforded by
reinsurance can be summarized as under:

i) an insurer has more capacity to accept
though he needs to restrict exposure to a
level commensurate with his own net
resources.

ii) the net premiums and losses are stabilized over
a shorter period of time.

iii) the incidence of loss is widely distributed
iv) the problem of accumulations within each line

of business and between different lines is
controlled.
v) an insurer can accept new and untested risk
exposures with reinsurance support

b. It important to place reinsurance with a well
rated insurer because

1. When reinsurances are ceded and accepted it is

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