Types Of Reinsurance Contracts Designed For Risk Management

 Dear Readers, 

Wonder How Reinsurance Services Provide Coverage For Insurer's Losses? Here Are A Few Common Reinsurance Methods That Help Companies Mitigate Business Risks

 

What can businesses and governments do to navigate the economic and business landscape that is increasingly filled with uncertainties? 

 

Well, the answer is reinsurance companies can help to provide corporate solutions for a range of clients to provide financial security against any catastrophic events. 

 

Have you wondered how reinsurance services provide coverage and compensate insurers for their losses? 

 

In general, there are a total of three (3) common reinsurance methods that help insurers with risk mitigation and capital management. 

 

 

Excess Of Loss Reinsurance

 

The purpose of this reinsurance is to assist companies in risk management and loss retention. There are three forms of excess loss reinsurance:  

• Per Risk XL
• A form of reinsurance where the insurance policy limits are greater than the amount of reinsurance retention to reduce the amount of loss if emergencies happen. 
  

• Catastrophe XL
• A form of reinsurance that consists of multiple predetermined underlying policy limits. These contracts often feature a two-risk warranty, which provides coverage for more than one policy. 
  

• Aggregate XL
• A form of reinsurance that specifies participation by the reinsurer when aggregate excess losses for the primary insurer exceed a certain stated retention level. 

 

 Risk-Attaching Reinsurance

 

The term "risk-attaching" means that the reinsurer is responsible for the cedent's losses that arise from new or renewed policies during the reinsurance contract period, regardless of when the losses occurred. 

With this clause, the reinsurer has to provide coverage for all claims during that specific underwriting year, until all policies have expired and all losses have been fully settled. 

Conversely, no coverage will be given on claims that originate outside the coverage period, even when the insurers suffer from losses during the contractual period. 

Loss-Occurring Reinsurance

This form of reinsurance requires reinsurers to pay for all losses incurred by the cedent within the reinsurance contract period, regardless of when the policy's insurance caused the losses. 

It differs from risk-attaching reinsurance as all incurred losses during the reinsurance contract period have to be compensated, unlike risk-attaching reinsurance which does not cover policies that originated outside the coverage period. 

About Malaysian Reinsurance Berhad

Malaysian Reinsurance Berhad (Malaysia Re) is Malaysia's largest reinsurer, commanding more than 60% of reinsurance accepted premiums in the country. 

The team comprises experienced marketing executives, technical experts, and underwriting specialists to provide businesses with quality reinsurance services and products. 

Malaysian Re underwrites all classes of general reinsurance business and general retakaful business, with an extensive business portfolio across Asia and the Middle East. 

Head over to https://www.malaysian-re.com.my/our-solutions/market-service for more information about the reinsurance industry. 

Signing Off For Now And Take Care Till We e-Meet Again On My Next Post. 

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