Identify eight principal functions of reinsurance.

Identify eight principal functions of reinsurance.

1、Capacity

2、Stability

Ways to stabilize：@each risk@each occurrence@each year

3、Catastrophe Protection

4、Spread of Risks

Circumstances applying for  risk spreading:

•Accumulations of claims under different classes：

•Risks accumulate greatly when primary insurers write large volume of business which could make good profit in a certain period.

•To spread risks geographically (reciprocal exchange 互惠交换业务)

5、Financial Benefits

•Increase the credit of the original insured.

•40% premium reserve retained for 12 months

•Investing reinsurance premium during the moratorium   period

•Reinsurance commission

•Balance sheet betterment

6、Underwriting Expertise

•   Newly founded and /or  small companies

7、Decrease expense ratio & increase profit ratio

•Administration costs are very similar for either small or a large acceptance.

•Ceding commission will help to compensate some or all acquisition costs thus to control expense ratio of ceding company.

8、Withdraw from a Territory or Line of Business

•Administration costs are very similar for either small or a large acceptance.

•Ceding commission will help to compensate some or all acquisition costs thus to control expense ratio of ceding company.