Reinsurance
Introduction
Reinsurance of protection products means sharing the risk covered with another type of insurance company – a Reinsurance Company.
Key Points
Reinsurance companies provide a service to direct offices (known as ceding companies), such as Legal & General. They do not deal directly with the general public.
A reinsurance treaty is a contract between a direct office and a reinsurance company where the reinsurer agrees to take a certain proportion of the risk underwritten by the ceding office.
Business Principles of Reinsurance
In simple terms the process of Reinsurance, which is widely used in the UK insurance market, helps reduce individual life insurance companies exposure to risk
We will only enter into Reinsurance arrangements with companies whose financial strength and security is extremely sound. All reinsurance companies which we deal with must have a Confidentiality Policy, at least as strict as our own internal confidentiality policy, and strictly adhere to the Data Protection Act (DPA) regulations. These are essential criteria for us to transact business with them.
Types of Reinsurance Treaty
| Type | Explanation |
|---|---|
| Surplus Treaty | Reinsurer agrees to take the cover when the sum assured exceeds a predefined “surplus” limit; e.g. when the sum assured exceeds a specific amount |
| Quota Share Treaty | Reinsurer agrees to take a predefined proportion of every policy |
| Facultative Reinsurance | Reinsurer assesses each risk individually. Unlike treaty cover, the reinsurer is not obliged to accept these risks; e.g. severely substandard lives |
