What is Reinsurance?
Ted Wainman
20 years: CA & educator
In the second video of this Insurance series, Ted explores the multiple forms of reinsurance and the ways in which they combine to provide extra cover against significant one-off events.
In the second video of this Insurance series, Ted explores the multiple forms of reinsurance and the ways in which they combine to provide extra cover against significant one-off events.
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What is Reinsurance?
11 mins 9 secs
Insurance companies make money from two primary sources: ensuring that the premiums received exceed the claims paid out (and the costs of running the business) and from the return made by investing those premiums until the claims are paid out. In order to protect their balance sheets, insurance companies also purchase their own form of insurance – called reinsurance – to ensure that a single loss does not end up bringing the company down.
Key learning objectives:
Outline the differences between technical and non-technical profit
Identify the differences between written and earned premiums
What is the difference between insurance and reinsurance?
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This content is also available as part of a premium, accredited video course. Sign up for a 14-day trial to watch for free.
What is the difference between technical and non-technical profit?
The technical profit is made on the provision of insurance services (where premiums received exceed the claims and the costs of paying those claims). The non-technical profit is the return on the investment of the premiums received until they need to be paid out as claims.
What is the difference between written and earned premium?
Written premium reflects the business written by the underwriters during a specific period. Earned premium reflects the matching of those premiums to the provision of insurance services. So a contract written this year, may well cover both this calendar year and next year.
What is the difference between insurance and reinsurance?
Insurance is the provision of insurance products and services to individuals and businesses. Just as we purchase insurance, insurance companies in turn take out their own insurance policies – called reinsurance – to protect themselves from significant catastrophes that might otherwise cause the company to go bust.
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This content is also available as part of a premium, accredited video course. Sign up for a 14-day trial to watch for free.
Ted Wainman
09:51
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