REINSURANCE:

MANAGING RISK IN INSURANCE WORLD

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AGENDA
Introduction
Importance
Key players
Types of reinsurance
Challenges
Conclusion
INTRODUCTION
REINSURANCE CAN BE DEFINED AS THE
PROCESS THROUGH WHICH INSURANCE
COMPANIES TRANSFER A PORTION OF
THEIR RISK TO OTHER PARTIES
(REINSURERS) IN EXCHANGE FOR A
PREMIUM. IN ESSENCE, IT'S INSURANCE
FOR INSURERS.
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EXAMPLE OF REINSURANCE
• Let's consider an insurance company called ABC Insurance, which specializes
in providing property insurance to homeowners in a region prone to hurricanes.
To manage its exposure to large losses from hurricane-related claims, ABC
Insurance decides to enter into a reinsurance arrangement with XYZ
Reinsurance Company.
• ABC Insurance has a portfolio of 10,000 homeowners' insurance policies, each
with coverage limits of up to ₨500,000 for property damage caused by
hurricanes. Concerned about the financial impact of a catastrophic hurricane
event that could result in numerous simultaneous claims, ABC Insurance seeks
reinsurance protection from XYZ Reinsurance Company.
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IMPORTANCE OF
REINSURANCE
• Risk Management: Reinsurance allows insurance companies to manage their 7
exposure to large or unexpected losses by transferring a portion of their risk to
reinsurers.
• Capital Management: By offloading a portion of their risk through reinsurance,
insurance companies can reduce the amount of capital they need to hold as a buffer
against potential losses
• Solvency Compliance: Reinsurance plays a crucial role in helping insurance
companies meet regulatory solvency requirements. By reinsuring their risks, insurers
enhance their financial strength and resilience
• Business Continuity: In the event of a significant loss event, reinsurance provides a
critical safety net that helps insurers maintain continuity of operations and fulfill their
obligations to policyholders
• Competitive Advantage: Insurers that utilize reinsurance effectively can gain a
competitive advantage by offering broader coverage, higher policy limits, and more
competitive pricing to policyholders.
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MAJOR PLAYERS OF
REINSURANCE
• General Insurance Corporation of India (GIC Re):
The company offers a wide range of reinsurance products and services, including
treaty and facultative reinsurance, across various lines of business such as
property, casualty, marine, aviation, and life insurance.
• New India Assurance Company Limited:
While primarily focused on direct insurance, New India Assurance also engages
in reinsurance activities both domestically and internationally.
• National Insurance Company Limited (NIC):
The company provides reinsurance support across a broad spectrum of insurance
lines, including fire, marine, motor, health, and liability insurance.
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TYPES OF REINSURANCE
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Proportional Reinsurance:
•Proportional reinsurance, also known as pro rata reinsurance, involves an agreement where the
reinsurer assumes a predetermined share of the insurer's risks and premiums.
•Under proportional reinsurance, the reinsurer shares in both the premiums and losses in proportion to
the agreed-upon percentage.
Non-Proportional Reinsurance:
•Non-proportional reinsurance, also referred to as excess of loss reinsurance, provides coverage for
losses that exceed a certain threshold or retention level set by the insurer.
•Unlike proportional reinsurance, where the reinsurer shares in all losses up to a certain limit set by
the insurer
Excess of Loss Reinsurance:
•Excess of loss reinsurance is a specific form of non-proportional reinsurance that covers losses
exceeding a predefined amount, known as the "attachment point" or "retention level.“
Catastrophe Reinsurance:
•Catastrophe reinsurance provides coverage for losses resulting from catastrophic events, such as
natural disasters (e.g., hurricanes, earthquakes, floods) or human-made disasters (e.g., terrorist
attacks).
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CHALLENGES TO REINSURANCE
1. Competition: With many reinsurers competing for business, there's pressure to offer lower prices,
which can squeeze profits.
2. Climate Change: More frequent and severe natural disasters mean reinsurers may face more claims,
leading to higher costs.
3. Rules and Regulations: Reinsurers must follow complex rules set by governments, which can
change and become more demanding over time.
4. New Risks: Technology and other changes bring new risks like cyber-attacks, which reinsurers must
understand and protect against.
5. Investment Challenges: With interest rates low, it's harder for reinsurers to make money from
investing their reserves, which can affect their overall financial health.
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CONCLUSION

"In conclusion, reinsurance serves as the backbone of the insurance industry, providing essential risk
management solutions that enable insurers to navigate complex and uncertain environments with confidence.
By spreading risk, enhancing financial stability, and fostering innovation, reinsurance plays a pivotal role in
safeguarding the interests of policyholders, insurers, and the broader economy. As we look into future the
reinsurance industry is going for rapid boost and thus, ensuring its continued relevance and resilience in
mitigating risks and safeguarding against the unexpected. Together, we stand poised to embrace the challenges
and opportunities that lie ahead, reaffirming the indispensable role of reinsurance in protecting lives, businesses,
and communities worldwide."
THANK
YOU
Vayu garg (20222192)
Pratush (20223430)