The Role of Reinsurance Industry
Describe the role of the reinsurance industry. Give examples from recent events of the importance of the sector.
Jack Nolan (09006300)
1. Introduction:
What is reinsurance? Why do insurance companies go through the process of insuring policies before transferring them to other entities? Reinsurance is a method which involves insurers insuring their own respective risks with reinsurance firms. Firstly, an important function of reinsurance is to ensure that the insurance operations of company’s doesn’t eventually lead to detrimental financial losses. ‘Catastrophes, unexpected liabilities, and a series of large losses that might be too great for an individual insurer to absorb can be handled through reinsurance’(McIsaac and Babbel 1995).Secondly, reinsurance is a method which allows an insurance company or underwriter the option of allocating part of their liability to a reinsurer based on their acceptance.
Billions are spent each year around the globe on reinsurance policies to ensure stability throughout the insurance marketplace. Similar to the operations of people and businesses insuring their own personal risk, insurance companies use reinsurance to transfer their respective risks. The first real signs of the reinsurance market was back in 1370, when an underwriter named Guilano Grillo contracted with Goffredo Bonaira and Martino Sacco to reinsure a ship on part of the voyage from Genoa to the harbour of Bruges (Kopf 1929). Since this quote, there have been unprecedented developments in the Reinsurance market. Nowadays, ‘’Reinsurance is a global business, covering risks from insurers in many geographic locations (Holzheu and Lechner 2007). There are many major international players within this particular volatile sector. Munich Reinsurance Company, Swiss Re Company Limited and Lloyd’s were ranked in the top five reinsurers based on gross premiums written for 2011 (Mcmahon 2012).
There has been a major emphasis placed on the reinsurance industry in
Jack Nolan (09006300)
1. Introduction:
What is reinsurance? Why do insurance companies go through the process of insuring policies before transferring them to other entities? Reinsurance is a method which involves insurers insuring their own respective risks with reinsurance firms. Firstly, an important function of reinsurance is to ensure that the insurance operations of company’s doesn’t eventually lead to detrimental financial losses. ‘Catastrophes, unexpected liabilities, and a series of large losses that might be too great for an individual insurer to absorb can be handled through reinsurance’(McIsaac and Babbel 1995).Secondly, reinsurance is a method which allows an insurance company or underwriter the option of allocating part of their liability to a reinsurer based on their acceptance.
Billions are spent each year around the globe on reinsurance policies to ensure stability throughout the insurance marketplace. Similar to the operations of people and businesses insuring their own personal risk, insurance companies use reinsurance to transfer their respective risks. The first real signs of the reinsurance market was back in 1370, when an underwriter named Guilano Grillo contracted with Goffredo Bonaira and Martino Sacco to reinsure a ship on part of the voyage from Genoa to the harbour of Bruges (Kopf 1929). Since this quote, there have been unprecedented developments in the Reinsurance market. Nowadays, ‘’Reinsurance is a global business, covering risks from insurers in many geographic locations (Holzheu and Lechner 2007). There are many major international players within this particular volatile sector. Munich Reinsurance Company, Swiss Re Company Limited and Lloyd’s were ranked in the top five reinsurers based on gross premiums written for 2011 (Mcmahon 2012).
There has been a major emphasis placed on the reinsurance industry in
Bibliography: * Coomber, R. J. (2006) ‘ Natural and Large Catastrophes-Changing Risk Characteristics and Challenges for the Insurance Industry’ The Geneva Papers, 31, 88-95. * Garvey, J. and Mullins, M. (2008)’ Contemporary Terrorism: Risk Perception in the London Options Market’ Risk Analysis an International Journal, 28(1), 151-160. * Gerber, J. (2011) ‘9/11 ended the “gentlemen’s agreement" in cover placement’, Reinsurance magazine, available: http://reinsurancemagazine.com/articles/911-ended-%E2%80%9Cgentlemen%E2%80%99s-agreement-cover-placement [25 Nov 2012]. * Golding, E. C. (1987) The Law and Practice of Reinsurance, 5th ed., London: Witherby & Co. Ltd. * Greeley, B. (2011) ‘The God Clause and the Reinsurance Industry’ BloombergBusinessWeek Magazine, available: http://www.businessweek.com/magazine/the-god-clause-and-the-reinsurance-industry-09012011.html [accessed 17 Nov 2012]. * Hajost, W. T. (2002)’ Reinsurance After September 11: New Realities and Old Verities’ Halloran & Sage, available: http://www.halloran-sage.com/Knowledge/articleDetail.aspx?storyid=2079 [accessed 15 Nov 2012]. * Holzheu, T. and Lechner, R. 2005. ‘The Global Reinsurance Market’, Handbook of International Business: Huebner International Series on Risk, Insurance, and Economic Security, p 877-902.. * Irukwu,O.J. (1982) Reinsurance in The Third World, 2nd ed., London: Witherby & Co. Ltd. * Kopf, E.W. (1929)’ Notes on the origin and development of reinsurance’ Papers in the Proceedings of the Casualty Actuarial Society, 16(33), 22–91 * McMahon, C. (2012)’ Top 50 Reinsurers Revealed’,Insurance Networking News, available: http://www.insurancenetworking.com/news/reinsurers-rank-best-munich-swiss-hannover-30967-1.html [accessed 12Nov 2012]. * McIsaac, A. D and Babbel, F. D. (1999) ‘ The World Bank Primer and Reinsurance’, Policy research working paper, No. 1512. * Smith, R.(1999) ‘REINSURANCE ISSUES FOR SUPERVISORS’ OECD,available: http://www.oecd.org/insurance/insurance/1905832.pdf [accessed 20 Nov 2012]. * Swiss-Re (2012) ‘Climate Week NYC 2012: the time for talking is over’, available: http://www.swissre.com/rethinking/climate/ [accessed 16 Nov 2012]. * Swiss- Re (2009)’ Natural catastrophes and man-made disasters in 2008’, available: http://www.preventionweb.net/files/8698_dd6346004d4e9669ac76eecedd316cf3sigma22009e1.pdf [accessed 10 Nov 2012]. * Swiss-Re (2012)’ Natural catastrophes and man-made disasters in 2011’, available: http://media.swissre.com/documents/sigma2_2012_en.pdf [accessed 12 Nov 2012]. * Time (2012)’ Hurricane Sandy Estimated to Cost $60 Billion’ Time Magazine, available: http://business.time.com/2012/10/31/hurricane-sandy-estimated-to-cost-60-billion/ [accessed 1Nov 2012].