Reinsurance

In the insurance world, we must recognize the term reinsurance, but may not know / understand in detail what is meant by reinsurance.

Reinsurance is a very important part of the insurance. Like a human body organs, the heart of the Reinsurance is insurance. Reinsurance arises because of the insurance itself, in other words there will be no reinsurance that insurance itself does not exist.

Thus the importance of the role of reinsurance, so that if an insurance company does not run reinsurance, it stands to reason that the insurance company will not be able to sustain its business and will eventually bankrupt / insolvent..

In the insurance industry, particularly in the case of closure of an insurance policy, is a very major principle that risks that need to be closed / should be shared, so that the risk would not burden yourself beyond limits.

The principle is known as the "Principle of Spread Risk". With the spread of these risks, meant the closure of a portion of the risk that it will be borne alone, while insurers will bear most of the risk of the other.

To spread the risk, there are 2 ways, namely : CO-INSURANCE and RE-INSURANCE.
- Co-insurance is a joint insurance.
- Re-insurance is insurance back.

From the description above, it is clear that it is doing Reinsurance is insurance companies, which in function is an institution insurer risk (Risk Bearing Institution) first or agency that originally closed the reinsured risks.

In the insurance world, there are two risks to get the insurance coverage, which is a big risk and low risk.

For large risks, clearly require reinsurance, because the magnitude of this risk exceeds the limits of the ability of an insurance company. Examples of Reinsurance with great risk, for example: building high-rise office building, Textile Mill, Paper Mill, Marine, Aircraft, and so on.

However, for a small risk is not so necessary for the reinsured, as it is still below the limit of the ability of an insurance company. Such as residence / home, which according to the assessment of insurance, residence / house value is still below the limit of the ability of insurance companies, so no need for the reinsured. With the exception of a small risk that this amounts to a lot, and in the judgment of the insurer would exceed the limits, then it needs to be reinsured.

In addition to large and small risks, there is also the type of risk that is not harmful (Non-Hazardous) and hazardous (Hazardous). Risk types are not dangerous, do not need to reinsured, while dangerous to risk, then it needs to be reinsured.

In the insurance industry, any closure risks / any risks that occur outside the limits of an insurance company and the insurance company is not able to bear it alone, it is necessary reinsurance.

And in every implementation of Reinsurance, will inevitably involve two parties, ie parties that offer reinsurance called "ceding Company" and the party receiving the reinsurance is called "reinsurer" or also known as reinsurers.