What Is Reinsurance?

Reinsurance is also called "reinsurance". On the basis of the original insurance contract, the insurer insured some of its risks and responsibilities to other insurers by signing a reinsurance contract. Reinsurance is based on the original insurance, and the generation of reinsurance is based on the need to diversify risks in the operation of the original insurer. In a reinsurance transaction, the company that splits out the business is called the original insurer or the branch company, and the company that accepts the business is called the reinsurer or the reinsurance recipient or the branch company. The premium paid by reinsurance for transferring risk liability is called reinsurance premium or reinsurance premium; the original insurer paid a certain fee in the process of soliciting business, and the remuneration paid by the reinsurer to the original insurer is called the reinsurance commission or reinsurance commission. Reinsurance can be divided into proportional reinsurance and non-proportional reinsurance. Proportional reinsurance is a reinsurance contract concluded between the original insurer and the reinsurer, and the proportion is agreed according to the insurance amount to share the responsibilities. For the insurance business within the agreed proportion, the original insurer is obliged to separate in time, and the reinsurer is obliged to accept, neither party has the right to choose. Proportional reinsurance is divided into fractional reinsurance, premium reinsurance, and hybrid reinsurance. Non-proportional reinsurance is divided into over-indemnity reinsurance and over-indemnity reinsurance. ^[1]

Reinsurance

(concept)

Reinsurance, also called reinsurance, is

Reinsurance first emerged during the development of European maritime trade. From the signing of the first reinsurance contract in Genoa, Italy in July 1370 to the establishment of Lloyd's in 1688, reinsurance was limited to marine insurance.

In the 17th and 18th centuries, due to the development of the commodity economy and world trade, especially the London fire in 1666, the insurance industry created a need for catastrophe loss protection, creating conditions for the development of the international reinsurance market.

Since the middle of the 19th century, reinsurance companies have been established in Germany, Switzerland, the United Kingdom, the United States, France and other countries to handle reinsurance business in marine, aviation, fire, construction and liability insurance, forming a huge international reinsurance market. .

After the Second World War, the national insurance industry in developing countries flourished with the independence of the country, and the international reinsurance industry entered a new historical period.

At the end of the 20th century, as an independent economic sector, insurance companies from all countries in the world must spread their risk responsibilities in accordance with the law of large numbers and the needs of the financial stability of insurance operations, regardless of scale. Become an indispensable part of insurance overall.

Reinsurance income of professional insurance institutions reached 123.8 billion yuan in 2013, accounting for 2% of the global market
Original insurance premium income of 2.02 trillion yuan in 2014 ^[2]

From the perspective of the reinsurance relationship formation process, there are several situations for reinsurance:

First, both parties of reinsurance are engaged in direct insurance business.

First of all, according to the limitation of liability, reinsurance can be divided into

Relationship between reinsurance and original insurance

Reinsurance is based on the original insurance, and the generation of reinsurance is based on the need to diversify risks in the operation of the original insurer. Therefore, the original insurance and reinsurance are complementary, they are both the commitment and dispersion of risk. Reinsurance is a further continuation of insurance and a component of insurance business.

The difference between reinsurance and original insurance is:

1.Different subjects

2. Different insurance subject

3. The nature of the contract is different

Reinsurance has two important characteristics:

First, reinsurance is a business operation between insurers.

Second, reinsurance contracts are independent contracts.

Difference between reinsurance and co-insurance

Both common insurance and reinsurance have the effect of spreading risks, expanding underwriting capacity, and stabilizing business results. However, there are obvious differences between the two. Co-insurance is still direct insurance, a special form of direct insurance, and the first diversification of risks. Therefore, each co-insurer can still implement reinsurance. Reinsurance is to further diversify risk on the basis of the original insurance, which is the second diversification of risk. Re-insurance can be used to make risk dispersion more detailed.