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Reinsurance is the transfer or cession of risk from the insurer to one or several reinsurers, whereby the insurer pays the premium to the reinsurer. This is done to ensure quality and sustainable risk assessment.
The insurer may transfer a part of the risk or the entire risk to one or several reinsurers, whereby the insurer pays the insurance premium. The agreement between the insurer and the reinsurer determines which part of the risk will be ceded, as well as the part for which the reinsurer will pay restitution for damages and the conditions under which that will be done.
Two basic reinsurance methods are facultative reinsurance (separate reinsurance) and treaty reinsurance.
Facultative reinsurance is negotiated separately for each risk, commonly by the insurers for individual risks that are either not covered or are insufficiently covered by the obligatory (treaty) insurance, for insurance amounts that exceed the financial limits of treaty contracts, and for specific risks. The facultative reinsurance costs are usually higher due to the individual assessment and assumption of every risk, even though it is this individual – and thus better – risk assessment that enables the reinsurer to determine the premium more precisely, depending on the type and exposure of the risk he/she assumes.
Treaty or obligatory reinsurance contract is the agreement between the insurer and the reinsurer on the transfer of the share of all policies agreed upon and issued in a given year, from the insurer to the reinsurer, which come within the scope of the contract. A treaty contract obliges the reinsurer to assume the negotiated types and scope of risk along with reinsurance, hence the name. Furthermore, there is also the facultative-obligatory insurance contract, in which the reinsurer can agree or decline to include an insurance contract into reinsurance.
In addition, treaty contracts include proportional and non-proportional reinsurance. In case of the former, a share of the risk included in the reinsurance is defined separately for each insurance contract. In non-proportional reinsurance, however, the reinsurer’s obligations are defined by the amount of the total accounts receivable based on all insurance contracts in the given year.
PARTNER BROKER L.t.d. operates under the license of the Croatian Financial Services Supervisory Agency (HANFA), a supervisory body for insurance and reinsurance brokerage companies. We focus on producing reinsurance solutions to specific risks that appear in the needs of our clients and which cannot be found in the local insurance market. This includes the following: