Objectives of Reinsurance


Objectives
An insurance company chooses reinsurance as a part of its responsibility to cover different risks for the benefit of its policy holders and investors. The important objectives of reinsurance are:

1) To reduce net liability and increase surplus for the insurance company

2) To protect against catastrophies

3) To stabilise the company's overall operating results by reducing the fluctuations in loss experience.

4)To limit liability on specific risks 

Comments

Post a Comment

Popular posts from this blog

Rights of the Insurer

Image
 The insurer under a fire policy has the following rights Right of avoiding the contract for non-disclosure of material fact:- If the assured mis-states any fact or conceals any material fact, the insurer can avoid the contract. The assured is bound to disclose not only the facts which he really knows but also those which he is deemed to know. Right of control over the property:- When the property or goods are damaged or destroyed, the insurer has an implied right to assume control over the damaged property. In order to safeguard his interests he can adopt any means he likes to mitigate further loss. Right of entering the property:- The insurer, on a notice of fire by the assured, has the right to enter the premises insured or the premises where the things insured are lying. Right of subrogation: When the insurer pays the amount of loss to the assured, he steps into the shoes of the assured. He gets all the rights which the assured has against the third persons. If th...
Read more

Final Accounts of Life Insurance Companies

Image
IRDA has prescribed specified formats for the preparation of financial statements. These formats are in the V of Schedule A of IRDA (Preparation of Financial Statements and Auditor's Report of Insurance Companies) Regulations, 2002 1 . Revenue Account ( Policyholder ' s Account - Technical Account )  The Revenue Account sets out all income and expenses relating to the insurance business ) The income of this account comprises : ( a ) Premium after adjusting reinsurance ceded and reinsurance accepted , and ( b ) Income from investments . Expenses include : ( a ) commission ( b ) operating Expenses ( c ) , Benefits paid ( d ) Interim bonus paid , and ( e ) Change in valuation of liability against life policies in force  2 . Profit and Loss Account ( Shareholders Account - on - - Technical Account ) This Account represents all income and expenses relating to share holder ' s account ( Those not relating to insurance business ) . The income of this account c...
Read more

Accounts of Insurance Companies

Image
The insurance companies prepare final accounts periodically to determine their profits or losses.From the accounting point of view, the business of insurance may be divided into two, 1. Life insurance business, and 2. General Insurance Business The major income of insurance companies is premium. The other sources of income may be in interest or 'dividends on investments, rent earned from properties let out etc. The major expenses of the insurance companies may be the settlement of claims, surrenders, annuities, bonus payments, commission paid to insurance companies and other taxes paid by the insurance company etc.The real gain is then a certain amount of the "Reserve for Unexpired Risks" Books for Maintenance of Accounts Insurance companies are required to keep up two types of books for the purpose of maintenence of accounts. Statutory Books and Subsidiary Books 1. Statutory Books  Statutory books comprise three registers which have to be statutorily main...
Read more