Excess reinsurance can have three forms: “Per Risk XL” (Working XL), “Per occurrence or Per Event XL” (or Cat XL) and “Aggregate XL.” Known as the Federal Reinsurance Backstop, the Terrorism Insurance Act of 2002 was passed in November 2002 and extended from 2005 to December 2007 and extended until December 2014. The law does not apply to reinsurers, see the terrorism insurance report. Reinsurance is the assurance that an insurance company buys from another insurance company to cover (at least partially) the risk of a major loss. By reinsuring, the company passes on part of its own insurance commitments to the other insurance company.” The company that acquires the reinsurance policy is called the “Ceding Company” or “cedent” or “cedant” in most agreements. The company that issues the reinsurance policy is simply called a reinsurer. In the classic case, reinsurance allows insurance companies to remain solvent after major disasters such as hurricanes and forest fires. In addition to its fundamental role in risk management, reinsurance is sometimes used to reduce the capital requirements of the tax-deductible company, or for mitigation or other purposes. Although the reinsurer is not authorized to immediately cover each policy, it undertakes to cover all risks in a reinsurance contract. The above list is not designed as included.
Further changes and changes may be necessary depending on the content of the agreement submitted. The main forms of non-proportional reinsurance are excess and stoppage loss. A disaster loan is a specialized guarantee that increases the ability of insurers to provide insurance coverage by transferring risk to bond investors. Commercial banks and other lenders have been blocking mortgages for years and freeing up capital to expand their mortgage business. Insurers and reinsurers issue disaster bonds on the securities market through a specific insurer (SPRV) created for this purpose. These obligations have complex structures and are generally created offshore, where tax and regulatory treatment may be more advantageous. The SPRVs collect the premium from the insurance or reinsurance company and the investor and hold it in a trust in the form of U.S. Treasury bonds or other highly valued assets using capital income to pay interest on the principal. Disaster bonds pay high interest rates, but if the triggering event occurs, investors lose interest and sometimes capital, depending on the structure of the loan, both of which can be used to cover the insurer`s disaster losses. Bonds can be issued for a period of one year or several years, often three years. Types of reinsurance: reinsurance can be subdivided into two basic categories: contract and option. Contracts are agreements covering large groups of policies, such as all the automotive activities of an automatic insurer.
As an option, some individual risks, usually high quality or dangerous, such as . B a hospital, would not be accepted by a contract. The reinsurer`s liability generally covers the entire life of the original insurance once it is written. However, the question arises as to when one of the parties will be able to cease reinsurance for future new transactions. Reinsurance contracts can be written either on an ongoing or “term” basis. A permanent contract does not have a predetermined deadline, but as a general rule, each party can terminate 90 days or change the contract for new transactions.