Advantages And Disadvantages Of Facultative Reinsurance

Broadly, there are two main ways through which reinsurance may be distinguished. These are, Facultative reinsurance, and Treaty reinsurance. Both types of reinsurance are having their Advantages And Disadvantages. Here I am discussing the major Advantages And Disadvantages Of Facultative Reinsurance along with how this Reinsurance works. I will discuss relative Advantages And Disadvantages Of Treaty Reinsurance later. How Facultative Reinsurance Works: Facultative Reinsurance is the original form of reinsurance. Participation by reinsurer in a risk is not prearranged through a standing treaty contract. Reinsurance has to be arranged by …

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What Are The Different Types Of Reinsurance Arrangements

It is probable that the reinsurer may have sufficient amounts ceded from a number of different sources and unfortunately the cession may relate to the same risk. To relieve itself from this undesirable accumulation, the reinsurer would itself have to resort to reinsurance. There are Different Types Of Reinsurance Arrangements available in insurance world. Different Types Of Reinsurance Arrangements in Insurance World: Broadly, there are two main Types Of Reinsurance Arrangements. These are : Facultative Reinsurance Treaty Reinsurance Treaties are of various types and some of the important Treaty Reinsurance are …

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What Are The Main Reasons For Reinsurance

It is probable that the reinsurer may have sufficient amounts ceded from a number of different sources and unfortunately the cession may relate to the same risk. To relieve itself from this undesirable accumulation, the reinsurer would itself have to resort to reinsurance. There are some other reasons for reinsurance which are given below: i) Risk Minimization By Spreading: The basic concept of insurance is to spread the risk over as wider an area as possible as so to decrease the burden of loss at each stage. Reinsurance facilitates a …

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Importance Of Reinsurance To Insurance Companies

We should get ourselves acquainted with a very common term, known as retrocession, widely used in reinsurance transactions. But what is retrocession in insurance?  OK. This virtually means reinsurance of reinsurance. Again, What is the Importance Of Reinsurance and Retrocession To Insurance Companies? It should be appreciated by the visitors that reinsurance enjoys no immunity from the operation of the principles governing sound practice for insurers. The reinsurer also must avoid a concentration in conflagration areas or catastrophe situations, and must maintain a wide distribution of its risks assumed from …

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What Is The Concept Of Reinsurance Business

The Concept Of Reinsurance Business: A direct company may find that it has placed itself under liability to a very large number of policy-holders. It may consider that it has undertaken more than it can safely carry. Therefore, the company, because of its outstanding contractual obligations, may desire to protect itself. It may seek to lessen its burden by getting some other company to assume a part of its liability in case of a loss. The ORIGINAL OR PRIMITIVE OR DIRECT insurer, as is often called to represent direct-writing company, …

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What Is Meant By Reinsurance With Example

Reinsurance is insurance of insurance. This means that the original insurer,who originally accepted the risk from the original insured, gets the risk covered with another (Reinsurer) for the same reason the original insured got protection for. There are many risks in almost all classes of business which may be too big for an insurer to digest or to bear on his own account. Because, the financial strength of the insurer on that account may not be healthy enough to bear a loss, if it takes place at all. Moreover, there …

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10 Important Terminologies Used in Reinsurance

Before proceeding to the study of reinsurance, it is required of the students to understand the meaning of certain terminologies commonly used in the transaction of reinsurance business. In the absence of such understanding the student is likely to get confused and the study might mean obsolete to him. The terminologies used in reinsurance are : 1. Re-insurance/Reassurance : This means insurance of insurance. The original insurer gets the risk, assumed from the original insured (primary insured), covered (reinsured) with another insurer known as reinsurer) for the same reason as …

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Waiver Of The Principle Of Proximate Cause

Sometimes the application of the principle of proximate cause may be waived by insurers through policy condition. The best example here is perhaps the “standard fire policy”. The fire policy does not cover the loss due to “spontaneous fermentation”, but any resultant fire damage is covered. This is because the insurers have used the word “its own” before “spontaneous fermentation” which means that only the property subjected to spontaneous fermentation is excluded but any resultant fire damage is covered. Had the words “its own’ not been there the resultant fire …

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Rules For Application Of Proximate Cause In Insurance

To treat proximate cause as if it was the cause which is proximate in time is out of the question. The cause which is really proximate is that which is proximate in terms of efficiency. That efficiency might have been preserved although other causes might meantime have sprung up, which have not yet destroyed it or really impaired it, and it may culminate in a result of which it still remains the true efficient cause to which the event could be ascribed. With regard to pay-ability or otherwise of a …

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The Principle Of Proximate Cause In Insurance

Until recent past the Principle of proximate cause was not used to be considered as a principle as such. However, the present school of thought has given this doctrine the status of a principle and, therefore, now-a-days it is considered to be one of the six principles of insurance, backed up by sound rules and legal dictum. The principle of proximate cause virtually revolves around the claims administration and, more precisely, diagnosing the pay-ability or otherwise of a claim on the question of perils covered by a policy. A policy …

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