It is believed that the first known reinsurance contract was concluded in Genoa (Italy) about 600 years ago. The contract provided reinsurance coverage for the insurance of goods shipped by sea from this city to Bruges (Belgium).
However, the first contractual reinsurance in a more modern understanding appeared in Germany in 1820 as a result of a rapid economic and industrial development. Same as today, its main goal is to support insurers. Reinsurance, first of all, is an instrument of financial protection or, in other words, it is payment guarantee. Reinsurance allows distribute risks between several insurance and/or reinsurance companies without affecting the insured in any way (and he usually does not even know how and where his risks are reinsured).
The reinsurance scheme is simple: the insurance company accepts the risk and transfers part of its obligations to its partner, reinsurer. And if insurance event occurs, the insurer compensates for the damage at its own expense under the main contract, and the reinsurer pays its share. The main perk of reinsurance is that the insurer can enter into large contracts without the risk of losing everything and going bankrupt. And for the end consumer, reliable reinsurance means absolute guarantees of payments.
By the beginning of 2022, up to 72% of reinsured liability was placed by Russian insurers on the international market. The main share of such contracts fell on the European countries. Due to new economic conditions this trend is changing. Let us note that Asian countries also have their own reinsurers and brokers. For example, as of February 2022, China ranks eighth in terms of the volume of reinsurance contracts with Russian companies, and its share is gradually increasing. There is also India, Iran, etc. However, these markets are not available for the life insurance business due to the lack of specialization in “life” risks.
It is important to note that insurance companies can operate without reinsurers. There are small players on the Russian market who do not use such a tool and develop without it. Besides, not all “life” risks are subject to reinsurance. Survival, for example, will not fall into them by virtue of the law.
Reinsurance is mainly needed for large risks; most often these are objects of property insurance. And reinsurance in life insurance is needed to protect against small but very frequent losses or against very large losses but rarely occurring, for example, insuring clients against catastrophic loss (dam failure, earthquakes, etc.).
Reinsurance is the “inner workings” of the insurance company, the client does not participate in this contract; any risk under the insurance contract is managed by the insurer not reinsurer. However, the client has the right to know whether the insurance contract he is planning to conclude with the insurer is secured by reinsurance. Along with reliability of the insurance company with which the contract is concluded, it is an additional guarantee for the client of receiving payment in case of insurance event.
Source: https://www.insur-info.ru/comments/1484/
Photos are from open sources.
