Page 229 - Reinsurance Management IC85

Reinsurance Management

The larger the population of insured assets or
persons or interests the accuracy of probability
of loss in their regards keeps improving. It is
the probability theory that enables the insurer
to cope with variations in the pattern of actual
losses.

What if there be:
i) catastrophe like earthquake, tsunami ? or
ii) accumulation of many losses ? or
iii) simple lack of financial capacity ?

In each of the above scenarios the insurers,
however, will be unwilling or unable to go back
to their policyholders for additional payment if
losses turn out to be greater than expected.

They must rely on a cushion of working capital
(provided by the shareholders) to meet such losses.
One of the main aims of insurance regulators is
to ensure that insurers always have a sufficient
margin of assets over estimated liabilities

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