Reinsurance is when insurance companies need to buy insurance for themselves.
It is a form of insurance purchased by insurance companies to lessen the amount of loss an insurer can possibly suffer from an unusual event. For example, Reinsurance protects insurance companies from any disastrous event that would affect their customers and business.
If an insurance company is at risk of a potential costly event, then that event could cause the company to go bankrupt or shut down if the company are simply unable to cover the loss. For example, there is a disastrous event such as a hurricane and the insurance company were unable to pay the claims resulting from the damage of the hurricane.
Different types of Reinsurance
There are many different reinsurance schemes available, but there are two main categories, and these are listed below.
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