Life Reassurance

Reinsurance is a method whereby the life insurer, the company that insures the life of the insured, transfers part of the risk to another company called the reinsurer, and life insurance company called the assigned company or the original company. Insurance is to reduce the risk of insurance facing the insurance company, the insurance risk facing the life insurance company is premature death

Life insurance companies accept re-insurance from one another. However, there are specialized reinsurance companies that do not accept direct insurance, meaning that they do not deal directly with the insured

Persons participating in the reinsurance market
The reinsurance market consists of reinsurance buyers, intermediaries and reinsurance sellers, buyers such as direct insurers who deal with the insured and buy reinsurance, brokers such as insurance brokers, sellers such as reinsurers, and direct insurers as sellers also accept re-operations Insurance from each other

The Insured is not a contracting party to the reinsurance contract, since the reinsurance contract is a contract between the direct insurer and the reinsurer, and the insured has no role or position in this contract. Consequently, even if the renter fails to fulfill his obligations Towards a direct insurer for any reason, the direct insurer is still liable to the insured, because the reinsurance contract is independent and separate from the insurance contract, and in fact most of the insured know nothing about the existence of reinsurance contract

The need for reinsurance
The basic principle in all types of insurance is the spread and distribution of the risk spreading the risk. If the insurance amount of the document is one million pounds and the insured dies, the insurance company will bear a loss of one million pounds, but it can reduce this loss if from the beginning to divide the amount of one million pounds, The rest is reserved for insurance companies or reinsurers, meaning that they restock the surplus and each company determines the retention limit that it wishes. The retention unit and the reinsurer's liability are Specified in the reinsurance contract

Death strain
Death stress is the total amount of death claims paid minus the total reserve on the documents relating to these claims. For example, if the death benefit paid on a document is 1,000 pounds and the actuarial reserve on the document that the insurance company has made is 80 pounds, the death stress ) Is 920 pounds

Mortality is the result of unexpected early claims before life insurance premiums take up the opportunity to build huge reserves such as those owned by established insurance companies. So the new insurance company enters into reinsurance agreements to restore a large proportion of the stress of death and may return all In the early years, and as these new companies become more stable and established, their need for reinsurance decreases and increases the retention rate

New Business Stress
The stress of the new business is stress on the life insurance company when you enroll in new insurance business, ie when issuing documents, initial premiums are insufficient to cover the initial expenses that are high in the early years of issuing documents such as the initial commission of the insurance broker and administrative expenses and early death claims And build the necessary reserve on the documents and may increase these high expenses on the first premiums obtained by the insurance company, but the continued collection of installments over time, the stress decreases, and then the return (profit) to emerge, and when we say that this person strained himself, , It means carrying it unbearable, or carrying it overboard

Reinsurance is necessary for a new insurance company that has started issuing life documents, and the new insurance company wishes to make the new insurance business stress within its capacity or capacity. By reinsurance, the payer pays a commission to the assigned company,

Types of reinsurance Types of reassurance
There are two types of reinsurance: optional reinsurance and compulsory reinsurance (reinsurance). Both voluntary and compulsory reinsurance can be divided into relative reinsurance and reinsurance over loss


Re-insurance Optional Facultative Reassurance
Under the optional reinsurance, each risk (each document or each insured) must be reinsured separately. The insurance company submits a request to the reinsurance company, and the reinsurance company has the freedom to accept or reject this request. They prepare a guarantee that the company assigns as evidence of the contract. The disadvantages of this method are that they consume a long time and are administratively expensive, especially if the insured will be reinsured by a number of reinsurance companies. From the medical examination to them as well as the rest of the details of each danger, and The insurance company can accept the insured's insurance only after obtaining the consent of the reinsurers

Reinsurance (compulsory reinsurance)
 Treaty Reassurance / obligatory reinsurance

Due to the optional reinsurance defects, reinsurance agreements have emerged. Under the agreement, the selection element has been removed. The author is no longer free to choose or accept the risk and the assigned company is no longer free to assign or not to assign the risk. Under the agreement The reinsurance shall be automatic, ie any amount exceeding the retention limit of the assigned company shall be assigned to the reinsurer up to the agreed maximum, and the reinsurer shall accept it, and any excess excess exceeds the maximum limit of the agreement The insurer has the right to indemnify the insurer D optionally be secured.

Under the agreement, the sponsor does not issue a formal guarantee for each risk because coverage is automatic

Relative reinsurance
Proportional reinsurance / Pro rata reinsurance

Relative reinsurance agreements are divided into the following types

1 Reinsurance Agreement

2. Re-insurance surplus agreement

Almost all life insurance documents are re-secured under the relative reinsurance on each individual life document, where the liability of the employer is determined as a percentage of the insurance amount of the document under the original condition, or as a percentage of the risk amount on the document under the risk premium method

There are two relative reinsurance methods for both the original terms method and the premium risk method

Original conditions / or reinsurance based on original conditions
Original Terms / original term reassurance

If the reinsurance is concluded on the basis of the original terms of the life insurance policy it is called the participation of coinsurance ,, this means that the assigned company will shift the risk to the reinsurer at the reinsurance price is the same as the original policy, (If 50% of the original installment is received, it will pay 50% of the claims) and the reinsurer will then follow the responsibility of the insurance company to follow the liability of the ceding company for death, liquidation, accrual and profit claims Related to the document , This means that the reinsurance is subject to the same conditions as the original document, but the payer pays a commission to the assigned company, and the temporary insurance documents of all kinds are re-secured on the basis of the original terms (on a participatory basis), and it is rare to re-secure life documents with participation in Profit on the basis of the original conditions because the reinsurer finds it difficult to follow the fate of the company assigned in relation to the investment policy where he must pay his share in the profits distributed by the insurance company annually to the policyholders, because the investment status of the promoter may not match the investment status of the assigned company, , For When a company wishes to re-secure monetary value documents (such as life and mixed), the risk premium method is better

* Reinsurance on the basis of the original conditions leads to the transfer of a large part of the premiums of the insurance company to the reinsurer, leaving a small part of the premiums to build the reserve account, so the original method of conditions are limited to temporary insurance, and is not suitable for life insurance policies with participation in profits.

* If the quota agreement is based on the original conditions, a fixed percentage of the insurance amount of each document, whether the insurance amount is small or large, must be transferred to the employer. Therefore, the quota agreement on the basis of the original conditions is ineffective (low efficiency) To reduce the insurance risk that the insurance company faces, it reduces the small amount of documents (with a small insurance amount) and leads to significant retention for large documents.

Definitions of the terms in the table above
* The policy year is the year beginning on the annual date of the document (the date of the beginning of the insurance) and ends on the following annual date, eg if the document is 10 years old, starting on 1/8/2002 and ending on 1/8/2012 the The first insurance year for the document is the year 2002 beginning on 1/8/2002 and ending on 1/8/2003

* Age at the date of next birthday age next birthday is the age of the insured

Actuarial reserve is the statutory or statutory reserve

* Amount at risk is the amount of the insurance minus the actuarial reserve

* Rate of risk premium is the premium rate that covers the risk of death

* Premium reinsurance reins. premium is the premium payable to the reinsurer which is the sum of the premium rate multiplied by the risk in the amount of the reinsured risk.

It is clear from the table that the amount of the initial risk (initial) at the beginning of the first insurance year is one thousand pounds, which is equivalent to the amount of nominal insurance is fully complete nominal sum assured This is because the first installment has been fully used in the payment of commissions and expenses of this document Therefore, no reserve has been established in this year. In the last year, there is no need for reinsurance because the reserve has reached its peak.