Almost all insurance companies have a reinsurance program in place. Provide 4 reasons why it is important for a policy holder to make sure that her insurance policy is backed by a strong reinsurance company.
4 Reasons why it is necessary for insurance companies to have
reinsurance program are:
1. It protects the insurance company from potential risks and the
losses are shared among the reinsurance companies making the
insurance companies more stable.
2. The reinsurance company is usually larger than the
insurance company and very well diversified as compared to the
insurance company making it less prone to risk or losses.
3. Since the insurance industry as a whole becomes less risky they
can charge less premium from the policy holder and more and more
policyholders can be brought under the ambit of insurance.
4.Since the reinsurance company is larger and it has
more expertise in the industry , hence guiding the insurance
companies and sharing knowledge.
Please Discuss in case of Doubt
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