REINSURANCE

JYOTHI.G.S
MBA99613
INTRODUCTION
• The Great Chicago Fire of 1871 gave birth to the concept
of Reinsurance as a method of risk bearing
• Reinsurance is that branch of insurance that is called the
insurer of insurers
• Life insurance companies and general insurance
companies transfer the excess of their risk acceptances to
one or more reinsurers
Cont……
• Due to the nature of the business, such transfer of risk is
more in general insurance contracts

• Insurance industry views reinsurance mainly as a part of

the non-life insurance segment
Meaning
Whenever an insurer considers that the risk on a
single life or a consignment, plant or machinery is
beyond the risk-bearing limit of the company, the
original insurer may pass on the entire risk or a part of
the risk to one and more insurers. This process of
transferring the risk is known as ‘Reinsurance’.
Reinsurance Pool
• Meaning :-
Reinsurance pool means the collective
underwriting of risk by a group of companies in which
each participant has defined and predetermined interest
in all the business underwritten.
Definition
In the words of P.B.Ramanujam, (former of Managing
Director of GIC) “The secondary insurer’s raison deter is
to accept the risk transferred by a professional insurer
either on account of his paucity of capacity or that the
exposure is far greater than the level of his retention or it
could be for the purpose of ensuring homogenization”
Concept of Reinsurance in India
After the world war 2nd the need for establishing
reinsurance in India was recognized.
To create reinsurance capacity, the India Reinsurance
Corporation was established.
This was followed by the establishment of the Govt
owned Indian Guarantee & General Insurance Company.
The insurance companies operating in India were
required to make cessions of these two.
Advantages to an insurance company from
reinsurance
 It limits the extent of loss an individual insurer may have
to bear
 In the event of any unforeseen catastrophe, reinsurance
steps in to assuage the financial losses to the company
 Reinsurance is an effective tool to protect shareholder
value
 Reinsurance as a business mechanism widens the scope
of reciprocal business, for reinsurance is mainly a global
risk transfer mechanism, banking heavily mutuality and
interdependence in risk sharing
International companies in India
Reasons for allowing international companies to India are:
 Such a step will expose the Indian market to state-of-the-
art developments in the international markets.

 Expertise will be available to the Indian companies in

effective assessment of risks and settlement of claims

 The move will to the creation of additional capacity.

Swiss Reinsurance Company

Munich ReinsuranceCompany
Types of Reinsurance Treaties
1. Facultative Reinsurance

2. Treaty Reinsurance
Reinsurance agreements
• Proportional

• Non-proportional
The guidelines on reinsurance issued by the IRDA:

 Developing adequate capacity and technical skills

 Ensuring the best protection for the reinsurance cost

incurred

 Simplifying the administrating procedures

 Maximizing the retention within India

• Presently all inward reinsurance is handled only
by GIC who has set up a special inward
reinsurance department called ‘Swift’
 Insurance Companies transacting Non-Life
Business in India
General Insurance Corporation of India(GIC)- National Reinsurance
Public Sector Companies Private Sector Companies

Agricultural Insurance Company of Bajaj Allianz General Insurance Co.

India
Export Credit Guarantee Council(ECGC) Cholamadalam MS General Life
Insurance Co.
National Insurance Co. HDFC Chubb General Insurance Co.

New India Assurance Co. ICICI Lombard General Life Insurance

Co.
Oriental India Insurance Co. IFFCO-Tokio General Insurance Co.
Public Sector Co. Private Sector Co.
United India Insurance Co. Reliance General Insurance Co.
Royal Sundaram Alliance General
Insurance Co.
Tata AIG General Insurance Co.
Thank You………