Insurance was created in response to a pervasive need for
protection against the risk of losses. It is feasible because it allows
many similar individual loss risks to be pooled into classes of risk.
Sometimes, however, the underwriting risk is too large to be assumed by any
one entity, even if the probability that an event will occur can be
accurately predicted. For example, a single insurance company might be
unable to cover catastrophe risks such as an epidemic or war damage because
catastrophe can strike a huuge number of insured parties at the same time.

Reinsurance, simply defined, is the transfer of liability from the
primary insurer, the company that issued the insurance contract, to another
insurer, the reinsurance company. Business placed with a reinsurer is
called a cession, the insurance of an insurance company. The reinsurer
itself may cede part of the assumed liability to another reinsurance
company. This second transaction is called a retrocession, and the assuming
reinsurer is the retrocessionnaire.

Reinsurance contracts are entered into between insurance (or
reinsurance) companies, whereas insurance ccontracts are created between
insurance companies and individuals or noninsurance firms. A reinsurance
contract therefore deals only with the original insured event or loss
exposure, and the reinsurer is liable only to the ceding insurance company.
An insurance company’s policyholders have no right of a

action against the
reinsurer, even though the policyholder is probably the main beneficiary of
reinsurance arrangements.

What does reinsurance do?

No single insurance company has the financial capacity to extend an
unlimited amount of insurance coverage in any line of business. Similarly,
an insurance company is always restricted in a size of any single risk it
can safely accept. If a risk is too large for a single insurance company,
it can be spread over several companies. Insurance companies often use this
process, known as coinsurance.

Reciprocity is the practice or cession of two primary insurers. It
is the exchange of one share of business for another insurer’s business of
the same type.

Reciprocity is an attempt to maintain the same premium volume while
widening the risk spread.

Reinsurance is more efficient and less costly thhan having several
insurers underwrite separate portions of a loss exposure. It is also a more
efficient way to spread the risk among several companies. But an insurer
might decide to buy reinsurance for other reasons. Reinsurance offers
advantages in financing, capacity, stabilization of loss experience,
protection against catastrophe, and underwriting assistance.


An insurer’s limit on the value of premiums it can write is related
to the size of its surplus. When premiums are collected in advance, the
company must establish an unearned premium reserve. Reinsurance enables a
company to

o increase its surplus by reducing its unearned premium reserve.
This mechanism is particularly useful lo a new or growing insurance company
or to an established insurance company entering a new field of


Capacity, in insurance terminology, means a company’s ability to
underwrite a large amount of insurance coverage on a single loss exposure
(large line capacity) or on many contracts in one line of business (premium
capacity). Reinsurance also allows insurers to cover larger individual
risks than the company’s capital and surplus position would allow or risks
that the company’s management would consider too hazardous.

Stabilization of Loss Experience

An insurance company, like any other business firm, likes to smooth
out its year-to-year financial results as much as possible. However,
underwriting losses can fluctuate widely in some lines of business as a
result of economic, climatic, and other extraneous reasons, or as a result
of inadequate business diversification. Reinsurance enables an insurance
company to limit year-to-year fluctuations. It is sometimes compared to a
banking operation where the insurer borrows from the reinsurer in bad years
and pays back when its loss experience is good.

Catastrophe Protection

The potential impact of a catastrophe loss from a natural disaster,
an industrial accident, or similar disasters on a company’s normal (or
expected) loss experience is the main reason for buying reinsurance. A
catastrophe loss ma
ay endanger a company’s very existence. In that case, a
reinsurance contract insures the insurer.

Underwriting Assistance

Reinsurance companies accumulate a great of information and
statistical experience regarding different types of insurance coverage and
methods of rating, underwriting, and adjusting claims. This experience is
quite useful, especially for ceding company that may want to enter a new
line of business or territory or underwrite an uncommon type of risk.
Reinsurance facilities can provide extremely valuable services for the
company entering a new market, but they are also when an insurance company
decides to stop underwriting in a particular line of business or geographic

What are the traditional reinsurance methods?

The two major categories of reinsurance contracts arc facultative
reinsurance contracts and treaty reinsurance contracts.

In facultative reinsurance (single risk), the ceding company
negotiates a contract for each insurance policy it wishes to reinsure. This
type of insurance is especially useful for reinsuring large risks, that is,
those that the insurance company is either unwilling or unable to retain
for its own account.
Facultative reinsurance, by nature, involves some degree of adverse
selection for the reinsurer. It is expensive for the insurance company and
practical only when the risks arc few. It is useful when the primary
insurer has no experience with a particular risk and turns to the reinsurer
for underwriting assistance.

In treaty re

einsurance, the ceding company agrees in advance to the
type, terms, and conditions of reinsurance. Treaty reinsurance affords a
more stable contractual relationship between primary insurer and reinsurer
than does facultative reinsurance. Most insurers depend heavily on treaty
reinsurance because facultative reinsurance is not practical when dealing
with a single business class or line. The reinsurer does not examine each
risk individually and cannot refuse to cover a risk within the treaty. The
treaty method is also less expensive and easier to operate and administer
than facultative reinsurance.

Although me reinsurer must accept all business cessions under the
treaty, adverse selection is less likely to occur if the insurer wants to
establish a long-term business relationship with the reinsurer. In this
case, the reinsurer follows the ceding company’s good or bad operating
results (somewhat as a banker does) over a longer period of time.

The type of reinsurance contract chosen depends on the distribution
of risks between insurer and reinsurer. There are two types of reinsurance
contract: proportional (pro-rate) or nonproportional (excess). Proportional
reinsurance can be extended through a quota-share or a surplus-share
contract. Nonproportional reinsurance can be issued for risk excess
(working XL per risk), for occurrence excess (per catastrophic event: cat-
XL), or for aggregate excess (stop loss).

Quota-Share Contracts

Under a quota-share contract, the primary insurer cedes a fixed
percentage of every exposure it insures within the class of business
covered by the contract. The reinsurer receives a share of the premiums
(less a ceding commission) and pays the same percentage of each loss.

Quota-share contracts are common in property and liability
insurance. They are simple to administer, and there is no adverse selection
for the reinsurer. Quota-share contracts are usually profitable for the
reinsurer because both commissions and terms are better.

A quota-share contract is a most effective means for small
companies to reduce their unearned premium reserve when taking on a new
line or class of business. A quota share is also ideal for reciprocal
treaties between insurance companies. For example, two insurance companies
with similar business volumes and profitability could each reinsure a 50
percent quota share of the other’s business. This could have substantial
diversification effects on each, particularly if they are involved in
different geographical areas.

Surplus-Share Contracts

Surplus-share contracts, like quota-share contracts, are defined as
proportional reinsurance, but the difference between them is in the way the
retention is stated. In a surplus-share contract, the retention is defined
as a monetary amount instead of as a fixed percentage.

As a result, in a surplus treaty, the percentage varies with the
extent of loss exposure and the limit imposed by the reinsurer on the size
of the potential loss. This reinsurance limit is usually defined as an “n-
line surplus treaty,” which means that the reinsurer will accept
reinsurance coverage up to n times the retention amount. The surplus can be
divided among several companies.

The reinsurer would pay its share of losses in the same proportion
as its share of the premium. The surplus treaty is particularly useful for
large commercial and industrial risks. It provides a larger line capacity
than the quota-share treaty and does not require the primary insurer to
share small exposures that it can carry itself. However, it does not confer
any unearned premium relief, which small insurers might need.

In a surplus contract, only the portion of the risk exceeding the
company’s retention is reinsured, leaving the company with a homogeneous
portfolio. The ceding company can keep more profitable business, and the
reinsurer takes on a higher share of the less-secure risks. However, the
reinsurer pays the ceding company lower commissions than under quota-share
treaties, and administrative costs are much higher.

Excess-Loss Contracts

Excess-loss (XL) contracts are different from pro-rata contracts in
that the ceding company and the reinsurance company do not share the
insurance coverage, premium, and losses in the same proportion. In fact, no
insurance amount is ceded under an excess-loss contract. The reinsurer is
not directly concerned about the original rates charged by the ceding
company. It pays the ceding company only when the original loss exceeds
some agreed limit of retention.

Usually, the ceding company pays the reinsurer a premium related to
the nature and extent of the coverage assumed by the reinsurer, and no
commission is paid to the ceding company. This is called the burning-cost

The burning cost is a percentage calculated by dividing total
losses above the excess point in a period by the premiums for the same
period. A maximum rate and a minimum rate are applied, and a deposit
premium is paid. As in the retrospective premium, the final premium is
adjusted at year end.

Per-Risk Excess Contracts

The retention under a per-risk contract is stated as a monetary
amount of loss (not an amount of loss exposure or coverage). The reinsurer
is liable for any loss amount greater than the retention stipulated in the
contract. This amount is often subject to a limit, for example $200,000 in
excess of $50.000, under this type of treaty, the reinsurer pays all losses
exceeding a deductible. As long as they do not overlap, more than one
excess-loss treaty may cover the same business.

Reinsurers risk excess treaties are effective in providing large
line capacity, since they suffer large losses. They are also effective in
stabilizing loss experience. In the part run, a primary insurance company
can even improve the results of an intently unprofitable business through
excess reinsurance. However, the reinsurance will probably refuse to renew
participation, and the primary insurer will pay more for any future

In health insurance, per risk could have several meanings. Insurers
may face creasing exposure to major claims arising from a specific medical
treatment, which explains the growing demand for reinsurance to cover the
risk of very expensive treatments. However, a claim in health insurance is
difficult to define because the distinction between a new illness and the
consequences of an ongoing, illness is problematic. Coverage is often based
on all treatment a person receives in one calendar year.

What is nontraditional (financial) reinsurance?

Instead of limiting their business to traditional methods of
assuming and financing risks in isolation, reinsurers have developed
financial products that blend elements of reinsurance, insurance, and
capital markets. These products are based on alternative risk-transfer
solutions with longer-term and more comprehensive forms of coverage. The
objective is mainly to protect the financial resources of the business as a
whole (balance-sheet protection), as contrasted with conventional event

Types of Contract

A reinsurance contract can be prospective, retroactive, or both.
Under a prospective contract, the ceding company pays the assuming company
a premium in return for indemnification against loss or liability relating
to events that occur after the contract’s effective date. Under a
retrospective contract, the ceding company pays the assuming company a
premium in return for indemnification against loss or liability resulting
from events that have already occurred. This reinsurance practice, called
loss-portfolio transfer, has become very popular.

By definition, the insurance risk involves uncertainties about the
ultimate amount of any claim payments (the underwriting risk) and the
liming of these payments and the timing of this payment. A reinsurance
contract is an agreement between the ceding company and the assuming
company whereby the latter assumes all or part of the insurance risk.
Contracts that do not transfer underwriting risk are referred to as
financing arrangements or financial reinsurance.

Historically, financial reinsurance took the form of retrospective
reinsurance covering catastrophe losses and past experience. Today, the
primary focus is on prospective products, which are a mixture of banking
and reinsurance products. Their characteristics include the assumption of
limited risk by the reinsurer, multiline coverage and multiyear term,
sharing of results with the primary insurer, and the explicit inclusion of
future investment income as a pricing consideration.

Nontraditlonal solutions generically referred to as alternative
risk transfer (ART), meet insurers’ needs for long-term planning and
balancing cash flow and resources. Coverage is limited over the entire,
multiyear term of the treaty, and risk transfer is less significant than
the timing of the payments (timing risk).

Finite-Risk Reinsurance

Finite-risk reinsurance (FR), one type of financial reinsurance,
insulates the primary insurer from the peaks and troughs of volatile
underwriting results during the contract period. It is a type of coverage
that combines risk transfer with a profit-sharing relationship between
reinsurer and client. Finite risk involves a limited transfer because the
client ultimately pays for most of the losses through premiums and
investment income. The reinsurer’s risk lies mainly in the untimely payment
of losses (timing risk). The multiyear nature of the contract allows the
reinsurer to use the time value of the money and to spread losses over
several years. This means that the client effectively trades today’s
underwriting income for tomorrow’s investment income.

In finite-risk reinsurance, insurers ate reimbursed a substantial
portion of the profits accruing over a multiyear period. Coverage under
finite reinsurance products is generally broad, without the list of
exclusions in traditional products. Among the most popular new forms of ART
are finite quota shares, which apply to business in current and future
underwriting years, and spread-loss treaties, which are used to manage
financial risks associated with payment time.

Aggregate stop-loss on a prospective basis is becoming a popular
form of finite-risk reinsurance. It is used to address a client’s exposure
to a low-probability, high-severity event. In the case of potential
catastrophe risks, the excess loss risk is partially retained by the
reinsurer, and the remainder is transferred to the capital markets via
securitiration through event-linked bonds or derivatives. Risk-sharing
partners in capital markets have been attracted to assuming insurance risks
because they are uncorrelated with the price movements of the stocks and
bonds that comprise a traditional investment portfolio.

What principles govern a reinsurance program?

The first step in creating a reinsurance program for an insurance
company is choosing a correct of net retention and the limits of
reinsurance company.

If net retention is too low, the insurer’s capital and surplus are
not put to effective use. Low retention probably means lower underwriting
results and investment income but also shows a lack of involvement on the
insurer’s part. The practice of reinsuring large proportions of risks
(fronting) has been widely criticized as bad insurance practice.

If the retention level is too high, however, the insurer runs a
risk of wide swings in the results and, in extreme cases, financial ruin.
The retention decision is usually based on the following factors:

• Insurer’s own resources, that is, paid-up capital and surplus

• Amount of premiums written expected to be generated by a portfolio

• Portfolio composition (size and number of policies)

• Class of business

• Geographical location and risk spread

• Insurer’s experience in the class of business

• Projected underwriting profitability

• Probability of ruin

• Company’s investment strategy

• Availability and cost of reinsurance

• Local regulations and foreign exchange controls

The four functions of reinsurance—financing, program-management
capacity, stabilization against fluctuations, and protection against
catastrophe risks—will all be needed at different times in a company’s
development. Thus, far from being cast in concrete, the reinsurance program
has to adapt as the company’s needs change.


Some insurability problems are peculiar to the health insurance
business. To be financially viable, insurance rates must be compatible with
projected losses, and the lack of reinsurance or the inability to reinsure
often boils down to incompatibility between the reinsurance rate and the
direct rate, which is too low to make a profit or to break even.

• The low value-high frequency of some risks may raise premiums to
the point where coverage may not be affordable.

• The high loss variance and propensity toward catastrophe losses
from specific risks may also make rates unaffordable and increase the
insurer’s dependence on reinsurance.

• High premiums may discourage participation as well as increase
moral hazard and adverse risk selection.
Risks with poor insurability profiles are sometimes initially written at a
loss in order to build capacity. Inferior risks are frequently covered for
social development or political reasons. This is not insurance or
reinsurance problem, however, arid will not be further considered here.

Reinsurance Costs

In pro-rata treaties, the ceding commission paid by the reinsurer
to the ceding insurer varies according to the reinsurer’s estimate of the
loss ratio to be incurred and the premium volume ceded under the treaty. It
usually covers the primary insurer’s acquisition expenses without providing
a long-term commission “profit” or incentive to the insurer to cede a
larger amount of business than necessary. Retrospective (profit-sharing)
commission arrangements are common.
In excess-loss treaties, the rate-setting procedure is more complicated
because the reinsurer expects long-term profitability. However, market
competition in reinsurance often drives reinsurance rates below the
“normal” rate. The rate is usually defined as the expected losses divided
by the premium volume (the burning cost) and multiplied by a profit margin.
When the primary company’s net retention increases (a similarity with the
deductible clause), the rate also declines.
In financial reinsurance, an account is established at the start of a
finite arrangement that is maintained according to a specific formula
throughout the life of the contract. Over time, the account fluctuates
according to experience under the contract. Coverage under finite
reinsurance is generally broad and, at the beginning of the term, the
insurer may pay a higher premium which, in addition to the customary
reinsurance procedure, is invested and earns interest over a multiyear

Projected investment income is taken into account in calculating
the future premium. Over time, in a limited-loss situation, finite
insurance can cost much less than traditional products. However, in case of
catastrophe risks, when the primary insurer sustains a loss, finite-risk
products afford less protection than does traditional reinsurance.

What do community-based health insurance funds need?

Rarely can microinsurance units constitute a perfectly balanced
portfolio, cither because their business volume is too small or because the
relatively large risks they cover acquire a disproportionate influence on
the portfolio. Furthermore, sometimes a variety of related insured events
cause a chain of losses with cumulative effect on the insurer.

Such adverse events can disrupt the balance of insured risks in the
portfolio, so that large discrepancies occur between the initial,
probability-bused forecast and the actual gross results. The four functions
of reinsurance are all needed at different times in a company’s
development, and the principles of a reinsurance program apply to all
community-based health insurance funds.

Different types of contracts offer community-based reinsurance
funds different advantages:

• Quota-share. Quota-share contracts are suitable for young, developing

companies or companies entering a new class of business. Because loss

experience is limited, defining the correct premium is difficult, and

the reinsurer bears part of the risk of any incorrect estimates.

• Surplus. Surplus contracts arc an excellent means of balancing the

risk portfolio and limiting the heaviest exposures because retention

can be set at different levels according to the class of risk (or

business) and expected loss. This type of treaty allows the direct

insurer to adjust the acceptable risk to fit the company’s financial

situation at any time. One of the drawbacks of this type of contract

is the considerable administrative work involved in determining

retention and amount ceded.

• Excess loss. Excess loss per risk (WXL-R), almost compulsory in a

reinsurance program, is the best way for a company to hold probable

claim peaks to an acceptable level. Excess loss per occurrence (cat-

XL) is useful only for classes of business with a significant

accumulation potential. Per-risk and per-event excess loss (VVXL-E)

combines WXL-R and a cat-XL coverage, which is very useful for health

insurance risks.

• Stop-loss. The stop-loss contract is preferred over all the others for

an entire line of business or portfolio. It provides insurers with the

most comprehensive protection for the business in their retention, but

it cannot be used to guarantee a profit for the insurer. Nonetheless,

it is a useful solution where the insurer wants protection against a

real threat to its existence as a result of an accumulation of

negative influences all in the same year.

• Alternative risk transfer. ART, characterized by the provision of

funding arrangements for perceived risks, involves the long-term use

of traditional reinsurance operations and derivative instruments or

capital market operations. This is a primary reason this approach is

particularly suitable for small health insurance funds.

Timing risk is at least as important as underwriting risk in finite-
risk arrangements. This coverage smooths out current and future premium and
claims patterns. For schemes with a high social-welfare component and no
demonstrable commercial viability at the beginning of their operations,
traditional reinsurance is unlikely to be available. Finite-risk products
appear to be a viable solution here because the underwriting result is
traded over a longer investment period.
However, traditional reinsurance may still be useful with a very high
franchise to cover catastrophe risks. A catastrophe severe enough for a
high franchise to be reached occurs only once in a while, and the risk can
be commercially assessed.

Substitute for Own Funds
Substantial own funds are traditionally viewed as the mark of a healthy
financial position, but using own funds to cover peaks in risk is not
recommended. Reinsurance will serve as an aid to financing, especially for
newly established insurance companies, because in the case of finite quota-
share treaties, for example, the reinsurer shares proportionally both in
costs and the formation of actuarial provisions. Many of the insurance
schemes implemented so far in developing countries for small groups and
rural populations have not been financially self-sufficient and may require
subsidization of premiums, administrative expenses, or both.

How does a reinsurance program work?

Reinsurance assists the functioning of the law of large numbers in
two ways. First, reinsuring a large number of primary insurers allows a
reinsurance company to diversify risk in a way that a single insurer
cannot. This can be done by allowing primary insurers to underwrite a
larger number of loss exposures, by improving geographical spread, and by
reducing the effective size of insured exposures.

Reinsurance plays a different financial intermediation role from a
pure brokerage in several ways:

• It provides a mechanism for allocating funds to the most
efficient premium capacity.

• It enables risks to be diversified and transferred from ultimate

• It enables changes to be made in the structure of insurance

These considerations apply equally to national and international
transactions, irrespective of the actors’ geographical location. The
presumption must be that efficiency in reinsurance intermediation is
enhanced to the extent that agents have access to a global system of
universal information about worldwide options, transaction costs, exchange-
rate uncertainty, and any extra risk dimension in sovereign exposure.


Insurance companies everywhere, regardless of type and size, use
reinsurance. It is a mechanism that allows an insurance company to share
the assumed risks with others, so as to improve the spread and moderate
fluctuations in the net results.

The reinsurance functions and methods explained in this summary
apply equally to small community-based health insurance funds. The four
functions – financing, capacity, stabilization and catastrophe protection –
are all needed to protect a company’s development. Nontraditional
reinsurance or finite-risk reinsurance are well suited to the company.


|Accept |priimti, sutikti |
|Accumulate |kauptis |
|Acquire |įgyti, išmokti |
|Adapt |prisitaikyti, adaptuoti(s) |
|Adjust |prisitaikyti, prisiderinti |
|Administer |valdyti, tvarkyti, vykdyti |
|Adverse |neigiamas, nepalankus, priešiškas|
|Afford |pajėgti, įstengti |
|Allocate |paskirti, paskirstyti |
|Allow |leisti, numanyti |
|Arrangement |rengimas, sutvarkymas, |
| |susitarimas |
|Assume |manyti, tarti, imti, prisiimti |
|Attempt |pastanga, mėginimas |
|Beneficiary |pasipelnytojas, paveldėtojas |
|Capacity |talpa, tūris, gebėjimai, |
| |kompetencija |
|Cede |užleisti, nusileisti, atsisakyti |
|Charged |pilnas, įtemptas |
|Comprise |susidėti, sudaryti, apimti |
|Computed |apskaičiuotas, apdorotas |
| |(kompiuteriu) |
|Confer |tartis, suteikti, pripažinti |
|Consequence |padarinys, rezultatas, svarba |
|Contractual |kontraktinis |
|Conventional |įprastas, tradicinis |
|Coverage |(čia) draudimo suma |
|Deduct |išskaityti, atimti |
|Defined |apibrėžtas |
|Derivative |darinys, derivatas |
|Dimension |mastas, užmojis, svarba, aspektas|
|Disaster |nelaimė, nesėkmė |
|Disclosure |atskleidimas, demaskavimas |
|Distribution |dalijimas, skirstymas |
|Divide |dalyti |
|Efficient |veiksmingas, efektyvus, našus |
|Endanger |kelti grėsmę |
|Entity |esybė, objektyvioji realybė |
|Equalize |sulyginti, suvienodinti |
|Exposure |statymas (į pavojų) |
|Extend |pratęsti, prailginti |
|Extraneous |svetimas, pašalinis, nesusijęs, |
| |šalutinis |
|Facility |palankumas, patogumas |
|Feasible |įmanomas, galimas, įvykdomas |
|Finite |ribotas, baigtinis, asmeninis |
|Fluctuate |svyruoti, būti nepastoviam |
|Frequency |dažnumas, pasikartojimas, dažnis |
|Hail |apipilti, apiberti; sveikinti, |
| |pašaukti |
|Hazardous |rizikingas, pavojingas |
|Hurricane |uraganas, audra, protrūkis |
|Impact |smūgis, poveikis, įtaka |
|Impose |paskirti, apgauti, įvesti |
|In that case |tokiu atveju |
|Inadequate |neatitinkamas, nepilnavertis |
|Intently |įdomiai, dėmesingai |
|Maintain |palaikyti, paremti, išlaikyti |
|Manage |susidoroti, sugebėti |
|Negotiate |vesti derybas, susitarti |
|Occurrence |atsitikimas, įvykis, atvejis |
|Otherwise |kitaip, kitais atžvilgiais, šiaip|
|Overlap |iš dalies uždengti, iš dalies |
| |sutapti |
|Percentage |procentinis dydis, dalis |
|Pervasive |sklindantis, plintantis |
|Portfolio |portfelis, aplankas, ministro |
| |pareigos |
|Portion |dalis, porcija |
|Predict |išpranašauti, numatyti |
|As right as rain |visiškai atsigavęs |
|Ratio |santykis, proporcija |
|Reciprocity |abipusiškumas, tarpusavio sąveika|
|Recoverable |kompensuojamas, grąžintinas, |
| |atgautinas |
|Reduce |sumažinti, susilpninti |
|Refer |minėti, kalbėti |
|Refuse |atsisakyti, nepriimti, atmesti |
|Regard |dėmesys, pagarba, nuolankumas |
|Relate |susieti, sutarti |
|Require |reikalauti |
|Response |atsakyti |
|Restrict |apriboti |
|Retained earnings |nepaskirstytas pelnas |
|Retention |išlaikymas, išsaugojimas |
|Selection |atrinkimas |
|Share |dalis, akcija |
|Similarly |panašiai, taip pat |
|Smooth |ramus, vienodas, sklandus |
|Spread |paplitimas, erdvė, plotis |
|Stipulate |kelti sąlygą |
|Subsidies |subsidija, dotacija, asignavimas |
|Substantial |esminis |
|Sufficient |pakankamas, užtenkamas |
|Suitable |tinkamas |
|Surplus |perteklius |
|Therefore |dėl to, todėl, taigi |
|Threat |grasinimas, grėsmė |
|Transaction |sandoris |
|Treatment |elgesys, traktavimas |
|Treaty |sutartis, susitarimas |
|Uncertainty |netikrumas, neaiškumas, |
| |nepastovumas |
|Uncorrelated |nekoreguotas |
|Unearned income |nedarbo pajamos |
|Unfavorable |nepalankus, neigiamas |
|Viability |gyvybingumas, daigumas |
|Volatile |kintamas |
|Whereas |tuo tarpu, kadangi |


1. Unfavourable: negative, minus, adverse;

2. whereas: present, while, meanwhile, spell;

3. treaty: contract, pact, agreement;

4. volatile: alternate, variable, changeable, mutable, choppy, unequal;

5. threat: menace, combination, thunder;

6. surplus: excess, abundance, overstock, plenty, overplus, glut;

7. share: part, section, half, portion, interest, partition;

8. smooth: quiet, calm, tame, cool, easy, steady, peaceful;

9. otherwise: anew, alias, differently, else, or, contrary;

10. reduce: slow, relieve, abate, trim, impair, extenuate, lessen;

11. regard: note, attention, heed, consideration, assiduity;

12. adjust: adapt, tune, supple, hew, trim, specialize;

13. hazardous: wildcat, perilous, risky, dodgy, touchy;

14. disaster: distress, evil, fatality, bane, plague, jinx, black ox, bad


15. attempt: pull, trouble, effort, tug;

16. acquire: master, learn, pick;

17. substantial: fundamental, vital, radical, material, drastic essence;

18. confer: size, bargain, negotiate, consult, parley, powwow;

19. capacity: bulk, volume;

20. divide: quarter, share, section, partition, distribute.


1. Why the insurance was created?

2. What are advantages and disadvantages of the reinsurance?

3. What process is known as coinsurance?

4. What are the traditional reinsurance methods?

5. What does capacity in insurance terminology mean?

6. What does called the burning-cost system?

7. On what factors the retention of decision is usually based?

8. What four functions of reinsurance do you know?

9. How do you think, why reinsurance companies need these functions?

10. How does a reinsurance program work?

11. How can you say other words finite-risk reinsurance?

12. What is the practice of cession between two primary insurers?

13. How does facultative reinsurance work?

14. How does treaty reinsurance work?

15. How does treaty reinsurance method differ from facultative


16. How does benefit spread between insurer and reinsurer?

17. What does the insurance company do if the reinsurance company

doesn’t adopt all left risk?

18. What is the first step of creating a reinsurance program?

19. What are the differences between quota-share contracts and surplus


20. In what document are forwarded all details of every risk ceded to

the reinsurer?


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