Insurers buy reinsurance for risks they cannot or do not wish to retain and to benefit from the capital relief reinsuranceprovides. Reinsurance and primary insurance represent two separate elements in the insurance value chain. By providing coverageagainst adverse fluctuations in claims, reinsurance protects the capital base of the primary insurer and creates a more diversifiedportfolio, thus reducing the volatility of the underwriting result. Another important benefit of reinsurance is that it allowsinsurers to accept more business with a given amount of capital, e.g., an insurer can afford to accept larger individual risksor risks exposed to larger loss accumulations from a single event.319
CITATION STYLE
Holzheu, T., & Lechner, R. (2007). The Global Reinsurance Market. In Handbook of International Insurance (pp. 877–902). Springer US. https://doi.org/10.1007/978-0-387-34163-7_18
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