Functions of Reinsurance
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Mayank Goyal FIA.
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Anmol Kaur
- Risk Transfer of Insurer’s losses
- Income smoothing of Insurer as their financial results become more predictable once the reinsurer agrees to absorb all shocks in claims paid i.e. large losses.
- Capacity to write more business with larger limits.
- Reinsurer’s expertise in performing insurer’s tasks like pricing, reserving makes results more reliable.
Can you think of any more important reinsurance functions?
Mayank Goyal FIA
Yes, there are some more like providing capital when in need. There are some financial arrangements on the name of insurance. There is also technical knowledge transfer and use of expertise in case of new product launch or insurer opening branches in a new geographical location
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