Page 269 - Reinsurance Management IC85

Reinsurance Management

perhaps stocks and shares for this purpose. It may
not be the best moment to sell and in some cases
the cash would not be quickly realizable.

Competition and rating in the market -
i. Inflation - To preserve the calculated acceptable

degree of fluctuation of results an increase in
retention exactly equivalent to the economic
inflation is called for. Inflation also tends to cause
higher claims without compensatory increase in
sums insured.

ii. State of the reinsurance market - In times of bad
results, reinsurers would normally tend to require
higher retentions with the clear intention of
causing the insurer to have a greater involvement
in the losses and, by implication, provoke them to
initiate some remedial action. At such times, an
insurer may be able to reinsure at terms which
are so advantageous to him that he may consider
it a shrewd financial move to reinsure as much
as possible.

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