A General Introduction To Reinsurance

 Dear Readers, 

If Our Insurance Provides Us Financial Security, How Does Insurance Companies Protect Themselves From Financial Risk? Read About The Practice Of Reinsurance Here

A General Introduction To Reinsurance

We, consumers, purchase insurance to provide ourselves with financial security in unforeseen circumstances, but have you ever thought about how insurance companies protect themselves from economic and business risks? 

What Is Reinsurance? 

Essentially, reinsurance is insurance for insurance companies. It is the mechanism that insurance companies use to lower and mitigate their business risks in the face of catastrophic events that could lead to a large number of insurance claims. 

It protects insurance companies from financial insolvency, thereby protecting the companies' customers from uncovered losses. 

How Does Reinsurance Work? 

In the secondary insurance market, reinsurance is the practice whereby insurers transfer portions of their risk portfolios to other parties through a contract to reduce the risk of paying a large obligation from insurance claims. 

This process is presented as a legal reinsurance contract between two parties, namely the ceding party and the reinsurer. The former diversifies its insurance portfolio while the latter undertake a portion of the risk in exchange for insurance premiums. 

What Are The Objectives Of Reinsurance? 

Floods, earthquakes or hurricanes are some examples of large-scale catastrophic events that result in huge losses of human lives, properties and assets. The existence of reinsurance is essential to step in and help insurance companies pay off insurance claims to consumers and prevent insurance companies from going into insolvency. 

On a global scale, reinsurance helps to stabilize the many insurance markets such as life, home, motor and health insurance markets. 

The History Of Reinsurance

Reinsurance has been around since the 19th century when urban fires in Europe necessitate the need for insurance companies. The world has gone through much turmoil, including world wars, pandemics and infrastructure destructions, but the sector has been providing insurers with financial stability in the face of these events. 

According to a study done by The Institutes Griffith Foundation, 2005's Hurricane Katrina would have caused 12% of U.S. insurers to fail if the reinsurance sector did not exist. 

The Reinsurance Industry In Malaysia

As a resilient economy, Malaysia also has a reinsurance industry in place. Malaysian Reinsurance Berhad (Malaysian Re) - a wholly-owned subsidiary of MNRB Holdings Berhad - is Malaysia's national reinsurer and the largest reinsurer in Southeast Asia. 

The institution underwrites all classes of general reinsurance business and general retakaful business. With an extensive portfolio of business expertise and a proven record of accomplishment, Malaysian Re is a regional and international player that established a strong market presence in Asia and the Middle East. 

Head over to https://www.mnrb.com.my/our-business/malaysian-re to find out more. 

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