The risk that average claim costs will differ from

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– the risk that average claim costs will differ from the amount expected when policies are sold; can be reduced by selling large numbers of policies across different types of insurance coverage in different areas Reinsurance – the purchase of insurance by an insurer - insurers can transfer underwriting risk by purchasing reinsurance - the reinsurance contract specifies the conditions under which the reinsurer will pay some of the buyer’s claim costs and the amount that the reinsurer will pay; the buyer pays the reinsurer a premium Reinsurance arrangements can be categorized as either proportional reinsurance (pro-rata insurance) or excess-of-loss contracts (non-proportional reinsurance). A reinsurance treaty covers multiple policies written by the ceding insurer. In contrast, with facultative reinsurance , the reinsurer evaluates each risk (policy) that the primary insurer would like to cede and decides whether to accept it on a case-by-case basis. Both treaty reinsurance and facultative reinsurance can use either proportional or excess-of-loss contracts . Enterprise Risk Management (ERM) – the process of coordinated risk management that manages the organization’s full range of risks as a whole; this allows for a continuous
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  • Winter '13
  • Fah
  • insurer, facultative reinsurance, insolvency risk, insolvent U.S. insurer

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