Reinsurance

REINsurance is a Risk Management practice in which an insurance company transfers a portion of its risk to another insurance company, known as the rEINsurer. This process allows the primary insurer to reduce the potential for large losses and stabilize its financial performance. REINsurance can take various forms, including proportional (where the rEINsurer receives a Share of the premiums and losses) and non-proportional (where the rEINsurer covers losses above a certain threshold).

Examples:

• Proportional REINsurance: A property insurer may cede 30% of its premiums and losses for a portfolio of policies to a rEINsurer, thus sharing both the risk and reward.
• Non-Proportional REINsurance: A life insurer might purchase excess of loss rEINsurance that kicks in after it has paid claims exceeding $1 million for a single event.

Cases:

• Hurricane Insurance: After Hurricane Katrina, many insurers sought rEINsurance to mitigate the financial impact of large claims, allowing them to remain solvent.
• COVID-19 Impact: Many insurers utilized rEINsurance to cover losses from pandemic-related claims, helping to spread the financial risk associated with unprecedented events.