Main reason for the practice of reinsurance that it enables a risk to be scattered over a much wider area and the principle of insurance is taken well care of.
Reinsurance is used in various branches of Insurance industry like; fire insurance, marine insurance, life insurance, property insurance.
11 certain legal aspects should be taken in to considerations in Regarding Reinsurance.
Facultative Reinsurance inducates that reinsurance has to be arranged by the insurer after getting a proposal of insurance from the would-be insured and preferably before giving any cover to the proposer.
A treaty reinsurance is a pre-arranged agreement whereby the direct insurer cedes and the reinsurer(s) accepts cessions within a pre-determined limit.
Reinsurance indicates to the process where the original insurer accepted the risk from the original insured gets the risk covered with another insurer or re-insurer for the same reason the original insured got protection for.