Reinsurance : Risk Allocation and Managing Risk

Reinsurance is the condition when one primary insurance company assign or transfer risk to another insurance company (or groups companies). In cases of life insurers, the object that is transferred can be risk of mortality, investment risk, surrender or the combination of those.

The process for reinsurance may occur in several circumstances where the company and/or insurers are facing some limitation. Let say an insurance applicant who has unusual risk condition, or need life insurance policy with higher nominal value (bigger than a retention limit of the insurance company). (more…)