Mataracy
VIP Contributor
Content difficult to comprehend.
Reinsurance is a system whereby an insurer who has accepted a risk can itself insure the liability it has already assumed either in whole or in part with another insurer. Its insurable interest, not in the original insurance , but in the insurance contract it has entered into in respect of the original insurance is unquestionable.
By this arrangement , an insurer is able to accept a larger amount of risk than its retention capacity. From the above definition or description, one can see that reinsurance involves two distinct contracts:
(1). The contract between the insured and the insurance company. Otherwise called the direct insurer or ceding company and
(2) The contract between the insurer and the reinsurer. Therefore there are three distinct interest in a reinsurance arrangement (1) insured (2) the direct insurer and (3) the reinsurer .
The interest of the insured or policyholder is in the original policy as he has no business with the contract between the insurer and the reinsurer because he dies not even know it exist.
In event of insolvency on the the part of the reinsurer, the direct insurer remains liable to the policyholder . On the other hand if the ceding company becomes I insolvent the reinsurer is still liable not to the insured but to the estate of the insurer and this becomes part if its assets. More so. If the insured has breached fundamental terms in the original policy,the reinsurer has no right against such wrong.
By this arrangement , an insurer is able to accept a larger amount of risk than its retention capacity. From the above definition or description, one can see that reinsurance involves two distinct contracts:
(1). The contract between the insured and the insurance company. Otherwise called the direct insurer or ceding company and
(2) The contract between the insurer and the reinsurer. Therefore there are three distinct interest in a reinsurance arrangement (1) insured (2) the direct insurer and (3) the reinsurer .
The interest of the insured or policyholder is in the original policy as he has no business with the contract between the insurer and the reinsurer because he dies not even know it exist.
In event of insolvency on the the part of the reinsurer, the direct insurer remains liable to the policyholder . On the other hand if the ceding company becomes I insolvent the reinsurer is still liable not to the insured but to the estate of the insurer and this becomes part if its assets. More so. If the insured has breached fundamental terms in the original policy,the reinsurer has no right against such wrong.