Reinsurance and Coinsurance

This chapter aims to introduce reinsurance and explain how it works. The paragraphs describe the nature of reinsurance that may be divided into outwards reinsurance and inwards reinsurance. The reader will understand the types of contracts for treaties. The contracts can be put into two categories: facultative reinsurance, obligatory reinsurance. In the paragraphs that follow, the methods of transfer of risks and losses are described. Reinsurance makes a distinction depending on whether the method is proportional or non-proportional. Each type of reinsurance is analysed in detail with numerical examples and graphs. Proportional reinsurance (Quota Share reinsurance and Surplus reinsurance) takes place through a sharing of risks, whereas non-proportional reinsurance (Excess of loss reinsurance and Stop loss reinsurance) is based on the reimbursement of the loss suffered. Then, the process of reinsurance in an insurance undertaking is presented. At the end of the chapter, coinsurance is described.