Page 297 - Reinsurance Management IC85

The Insurance Times

Pools are also helpful when the traditional methods
of reinsurance are not sufficient due to un
availability of data pertaining to a particular
coverage And where it is difficult to estimate the
future loss experience since there is not enough
data of any large claim in the past.

Reinsurance rates are basically decided on the
basis of previous claims experience in similar
cases. But if sufficient data is not available then
this estimation becomes very difficult.

For example in India, Market terrorism pool was
established to cover the risk of any claims arising
out of terrorist activities. Usually insurers may not
cover any loss arising due to terrorist activities.
But due to increasing instances of terrorist activities
business cannot be left unprotected and any big
loss may have serious consequences for the
economy.
It became necessary, therefore, to devise a new
mechanism for providing this type of cover, without
leaving insurers or reinsurers open to substantial

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