REINSURANCE
Define Reinsurance.
It is the insurance of insurance companies. Even insurance companies need protection in order for it to withstand catastrophic losses due to earthquake, flood and typhoon.
A reinsurance may either by treaty or facultative in nature. In the former, the reinsurer agrees to provide protection to the reinsured for all policies to be written within a period of one year. In the latter, the transaction is on a per policy basis. Each account must be offered to and accepted by the reinsurer.
When is reinsurance mandatory?
An insurer cannot retain an exposure that is more than 20% of its net worth. (See Section 221 of the Insurance Code of the Philippines).
To illustrate, Magaling Insurance Company's net worth is Php1 Billion. The said insurer is now being asked to issue a Fire Insurance for a newly-constructed building amounting to Php10 Billion.
The insurer must cede any amount in excess of Php200M or 20% of its net worth. The objective of this requirement is to prevent impairment of the claims settlement capacity of an insurer if it will accumulate too much exposure for a particular account to the prejudice of the rest of its clients.
What are the types of reinsurance?
It may be classified into the following:
It is the insurance of insurance companies. Even insurance companies need protection in order for it to withstand catastrophic losses due to earthquake, flood and typhoon.
A reinsurance may either by treaty or facultative in nature. In the former, the reinsurer agrees to provide protection to the reinsured for all policies to be written within a period of one year. In the latter, the transaction is on a per policy basis. Each account must be offered to and accepted by the reinsurer.
When is reinsurance mandatory?
An insurer cannot retain an exposure that is more than 20% of its net worth. (See Section 221 of the Insurance Code of the Philippines).
To illustrate, Magaling Insurance Company's net worth is Php1 Billion. The said insurer is now being asked to issue a Fire Insurance for a newly-constructed building amounting to Php10 Billion.
The insurer must cede any amount in excess of Php200M or 20% of its net worth. The objective of this requirement is to prevent impairment of the claims settlement capacity of an insurer if it will accumulate too much exposure for a particular account to the prejudice of the rest of its clients.
What are the types of reinsurance?
It may be classified into the following:
- Treaty
- Facultative
- Proportional
- Non-Proportional
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THE INFORMATION CONTAINED HEREIN HAS BEEN COMPILED FROM SOURCES BELIEVED TO BE RELIABLE. NO WARRANTY, GUARANTEE, OR REPRESENTATION, EITHER EXPRESSED OR IMPLIED, IS MADE AS TO THE CORRECTNESS OR SUFFICIENCY OF ANY REPRESENTATION CONTAINED HEREIN.
THE INFORMATION CONTAINED HEREIN HAS BEEN COMPILED FROM SOURCES BELIEVED TO BE RELIABLE. NO WARRANTY, GUARANTEE, OR REPRESENTATION, EITHER EXPRESSED OR IMPLIED, IS MADE AS TO THE CORRECTNESS OR SUFFICIENCY OF ANY REPRESENTATION CONTAINED HEREIN.