Cyber Risk in Reinsurance
February 12, 2025
Introduction Leadership in organizations is dictated and determined according to a variety of reasons and factors including personality, cultural, and country and regional aspects. Among the various factors, the cultural dimension of leadership is often not highlighted as it is taken as a given. However, with globalization and the advent of tighter integration and interconnectedness, […]
Whether it is a job interview or a follow-up interview with selected respondents who filled a survey questionnaire, it is essential that right questions are asked. However, asking a right question is just not it… There is more to conducting effective interviews. Read on to know how an interview conversation can be made effective… Avoid […]
Listening is a significant part of communication process. Communication cannot take place until and unless a message is heard and retained thoroughly and positively by the receivers/listeners. Listening is a dynamic process. Listening means attentiveness and interest perceptible in the posture as well as expressions. Listening implies decoding (i.e., translating the symbols into meaning) and […]
All insurance companies face foreign exchange risks to some extent. However, all insurance companies are not equally concerned about foreign risks. This is because, for most insurance companies, the risks as well as the premiums are collected in the same currency. Generally, the business of an insurance company tends to be managed locally. However, this […]
Curious observation is the first step in the decision making process. These two words, the curiosity and observation are very important for a decision making process. Curiosity means the desire to know or learn about something. A person who is curious does not accept anything easily. He always has skepticism towards everything. The curious people […]
In the previous article, we have already studied the concept of layering and how it related to reinsurance policies. We are now aware that layering is used so that the risk can be comfortably placed between multiple reinsurance companies instead of a single reinsurer having to bear all the risk.
Layering is a very popular method of reinsurance and is used by almost every major reinsurance company in the world.
Hence, every student of reinsurance must have knowledge about the pros and cons of layering. In this article, we will provide details about the same.
There are several benefits that can be attributed to layering. Some of the most important benefits have been listed below:
The benefit of layering is that it creates a standardized mechanism using which the risk of one layer can be transferred from one reinsurer to the other. Such a transfer can even take place via the secondary market.
As a result, the sum assured offered to the ceding insurer would be much lower compared to their expectations. It is for this reason that reinsurance companies prefer to use layering so that the needs of the customers can be met better.
The ability to generate less premium while setting aside even less capital in the form of reserves encourages reinsurance companies to underwrite layered policies.
The process of layering also causes certain disadvantages to the ceding insurer as well as to the reinsurance company. The details of the same have been mentioned below:
This can become quite tedious from the point of view of the ceding insurer who has to undergo the entire process again and again. Also, they receive the claim payments separately from each reinsurer. It can be difficult to track such payments and ensure that the claims which have been made have been settled in a timely manner.
Ceding insurers have often complained about the lack of service provided to them by reinsurance companies. This can be fixed by setting aside a larger chunk of the premium for administrative purposes.
The bottom line is that layered insurance policies have their pros and cons. However, for most parties, the pros far outweigh the cons. This is the reason that layering is common in the industry.
Your email address will not be published. Required fields are marked *