What is reinsurance and its features?

Reinsurance is an arrangement whereby an insurer so has accepted all insurance, transfers a part of the risk to another insurer so that his liability on any one risk is limited to a figure proportionate to his financial capacity.

What is the purpose of reinsurance?

Reinsurance serves many purposes. Its main purpose is a means used by an insurance company or an underwriter to reduce the financial consequences resulting from the perils that it has accepted as an insurer.

How does Reinsurance make money?

Under proportional reinsurance, the reinsurer receives a prorated share of all policy premiums sold by the insurer. For a claim, the reinsurer bears a portion of the losses based on a pre-negotiated percentage. The reinsurer also reimburses the insurer for processing, business acquisition, and writing costs.

How many reinsurance companies are there in Kenya?

There are three locally incorporated reinsurers in Kenya include Kenya Reinsurance Corporation, East Africa Reinsurance Company and Continental Reinsurance. There are also two regional reinsurers including Africa Reinsurance Corporation and PTA Reinsurance (Zep Re).

What is Kenya Reinsurance?

It provides reinsurance services to insurance companies in Kenya, Africa Middle East and Asia. It offers traditional non-life products, such as fire, accident, liability, motor and life classes.

What is reinsurance and why is it important?

Reinsurance is insurance for insurance companies.

Reinsurance can be offered in a variety of ways,including insuring a class of risk,a portfolio,or on a case-by-case basis.

Reinsurance companies evaluate potential risks that an insurance company’s portfolio presents before offering a policy and premium,much like an individual policy.

What are the disadvantages of reinsurance?

the insurer cannot rely on successful placement of a risk;

the administration involved is complicated and expensive;

detailed risk and loss information have to be disclosed;

‘error factor’ exists in hasty facultative placements;

What are the main objectives of reinsurance?

Wide distribution of risk to secure the full advantages of the law of averages;

Limitation of liability of an amount which is within the financial capacity of the insurers; .

Stability in underwriting over a period; and

A safeguard against serious effects of conflagrations.

What are the main reasons for reinsurance?

Decreases risk. Insuring large numbers of homes and businesses against damage is a risky business.

Increases capacity. When the risk of insolvency is decreased through the use of reinsurance,it allows the insurance company to take on more policyholders.

Protects against large catastrophes.

Stabilizes loss.