Page 300 - Reinsurance Management IC85

Reinsurance Management

available or in case of very large risk or
compulsory insurance.

Q.6. Trace the growth of International
Reinsurance and its present potentiality in
addressing complex nature of insurance
risks.

Ans. The history of reinsurance can be traced back to
the direct insurance business which was originally
started by the insurers. As the quantum of risk
grew it was not possible for the direct insurers to
fully retain the risk themselves. In order to share
the risk among different insurance companies the
concept of reinsurance was mooted.

A Direct insurance company has a limited capacity
to underwrite direct insurance business. This
capacity is dependent upon the capital of the
insurance company. Even though a direct insurer
may be interested to write an insurance business
but if its capital is limited it cannot underwrite new
business without adequate protection. If the
company insures business more than its capacity,

Sashi Publications - www.sashipublications.com 297

ight@ The Insurance Times. 09883398055 / 0988338