
What reinsurance is
Valuables and property need insurance. And insurance companies also need someone to protect them: that is where reinsurance comes in.
When they assume risks, insurance companies look for guarantees to honor their commitments in the event of losses. For this reason, they pass on part of the responsibility, and the premiums, to reinsurers.
There are innumerous advantages to this pulverization, such as an increase in capacity to absorb risks, maintenance of insurance company financial health, protection in the event of catastrophes, knowledge transfer in the industry, and others.
Therefore, reinsurance is an activity which brings security to all parties involved and has a fundamental role in making large projects feasible, thus making an essential contribution to economic development.
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Reinsurance
In general terms, reinsurance is insurance for insurance companies. It is a contract whereby a reinsurer assumes the commitment to indemnify an insurance company for losses which may arise related to the latter’s insurance policies.
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Assignment and Retrocession
These resources are also part of the reinsurance market. Insurance companies transfer part of a specific risk or a portfolio of risks to reinsurers. This is known as a reinsurance assignment. Reinsurers, in turn, have the resource of retrocession, passing on part of the responsibilities they have taken on other reinsurers, in order to protect their assets.
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Divided Risks
To guarantee accepted risks, honor commitments and maintain financial health, insurance companies pass on part of the risks, and the premiums, to reinsurers.