Introduction Insurance was created in response to a pervasive need forprotection against the risk of losses. It is feasible because it allowsmany similar individual loss risks to be pooled into classes of risk.Sometimes, however, the underwriting risk is too large to be assumed by anyone entity, even if the probability that an event will occur can beaccurately predicted. For example, a single insurance company might beunable to cover catastrophe risks such as an epidemic or war damage becausecatastrophe can strike a huge number of insured parties at the same time. Reinsurance, simply defined, is the transfer of liability from theprimary insurer, the company that issued the insurance contract, to anotherinsurer, the reinsurance company. Business placed with a reinsurer iscalled a cession, the insurance of an insurance company. The reinsureritself may cede part of the assumed liability to another reinsurancecompany. This second transaction is called a retrocession, and the assumingreinsurer is the retrocessionnaire. Reinsurance contracts are entered into between insurance (orreinsurance) companies, whereas insurance contracts are created betweeninsurance companies and individuals or noninsurance firms. A reinsurancecontract therefore deals only with the original insured event or lossexposure, and the reinsurer is liable only to the ceding insurance company.An insurance company’s policyholders have no right of action against thereinsurer, even though the policyholder is probably the main beneficiary ofreinsurance arrangements.
What does reinsurance do? No single insurance company has the financial capacity to extend anunlimited amount of insurance coverage in any line of business. Similarly,an insurance company is always restricted in a size of any single risk itcan safely accept. If a risk is too large for a single insurance company,it can be spread over several companies. Insurance companies often use thisprocess, known as coinsurance. Reciprocity is the practice or cession of two primary insurers. Itis the exchange of one share of business for another insurer’s business ofthe same type. Reciprocity is an attempt to maintain the same premium volume whilewidening the risk spread. Reinsurance is more efficient and less costly than having severalinsurers underwrite separate portions of a loss exposure. It is also a moreefficient way to spread the risk among several companies. But an insurermight decide to buy reinsurance for other reasons. Reinsurance offersadvantages in financing, capacity, stabilization of loss experience,protection against catastrophe, and underwriting assistance.
Financing An insurer’s limit on the value of premiums it can write is relatedto the size of its surplus. When premiums are collected in advance, thecompany must establish an unearned premium reserve. Reinsurance enables acompany to increase its surplus by reducing its unearned premium reserve.This mechanism is particularly useful lo a new or growing insurance companyor to an established insurance company entering a new field ofunderwriting. Capacity Capacity, in insurance terminology, means a company’s ability tounderwrite a large amount of insurance coverage on a single loss exposure(large line capacity) or on many contracts in one line of business (premiumcapacity). Reinsurance also allows insurers to cover larger individualrisks 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 smoothout its year-to-year financial results as much as possible. However,underwriting losses can fluctuate widely in some lines of business as aresult of economic, climatic, and other extraneous reasons, or as a resultof inadequate business diversification. Reinsurance enables an insurancecompany to limit year-to-year fluctuations. It is sometimes compared to abanking operation where the insurer borrows from the reinsurer in bad yearsand 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 (orexpected) loss experience is the main reason for buying reinsurance. Acatastrophe loss may endanger a company’s very existence. In that case, areinsurance contract insures the insurer. Underwriting Assistance Reinsurance companies accumulate a great of information andstatistical experience regarding different types of insurance coverage andmethods of rating, underwriting, and adjusting claims. This experience isquite useful, especially for ceding company that may want to enter a newline of business or territory or underwrite an uncommon type of risk.Reinsurance facilities can provide extremely valuable services for thecompany entering a new market, but they are also when an insurance companydecides to stop underwriting in a particular line of business or geographicregion.What are the traditional reinsurance methods? The two major categories of reinsurance contracts arc facultativereinsurance contracts and treaty reinsurance contracts. In facultative reinsurance (single risk), the ceding companynegotiates a contract for each insurance policy it wishes to reinsure. Thistype of insurance is especially useful for reinsuring large risks, that is,those that the insurance company is either unwilling or unable to retainfor its own account.Facultative reinsurance, by nature, involves some degree of adverseselection for the reinsurer. It is expensive for the insurance company andpractical only when the risks arc few. It is useful when the primaryinsurer has no experience with a particular risk and turns to the reinsurerfor underwriting assistance. In treaty reinsurance, the ceding company agrees in advance to thetype, terms, and conditions of reinsurance. Treaty reinsurance affords amore stable contractual relationship between primary insurer and reinsurerthan does facultative reinsurance. Most insurers depend heavily on treatyreinsurance because facultative reinsurance is not practical when dealingwith a single business class or line. The reinsurer does not examine eachrisk individually and cannot refuse to cover a risk within the treaty. Thetreaty method is also less expensive and easier to operate and administerthan facultative reinsurance. Although me reinsurer must accept all business cessions under thetreaty, adverse selection is less likely to occur if the insurer wants toestablish a long-term business relationship with the reinsurer. In thiscase, the reinsurer follows the ceding company’s good or bad operatingresults (somewhat as a banker does) over a longer period of time. The type of reinsurance contract chosen depends on the distributionof risks between insurer and reinsurer. There are two types of reinsurancecontract: proportional (pro-rate) or nonproportional (excess). Proportionalreinsurance 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 fixedpercentage of every exposure it insures within the class of businesscovered 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 liabilityinsurance. They are simple to administer, and there is no adverse selectionfor the reinsurer. Quota-share contracts are usually profitable for thereinsurer because both commissions and terms are better. A quota-share contract is a most effective means for smallcompanies to reduce their unearned premium reserve when taking on a newline or class of business. A quota share is also ideal for reciprocaltreaties between insurance companies. For example, two insurance companieswith similar business volumes and profitability could each reinsure a 50percent quota share of the other’s business. This could have substantialdiversification effects on each, particularly if they are involved indifferent geographical areas.
Surplus-Share Contracts Surplus-share contracts, like quota-share contracts, are defined asproportional reinsurance, but the difference between them is in the way theretention is stated. In a surplus-share contract, the retention is definedas a monetary amount instead of as a fixed percentage. As a result, in a surplus treaty, the percentage varies with theextent of loss exposure and the limit imposed by the reinsurer on the sizeof the potential loss. This reinsurance limit is usually defined as an “n-line surplus treaty,” which means that the reinsurer will acceptreinsurance coverage up to n times the retention amount. The surplus can bedivided among several companies. The reinsurer would pay its share of losses in the same proportionas its share of the premium. The surplus treaty is particularly useful forlarge commercial and industrial risks. It provides a larger line capacitythan the quota-share treaty and does not require the primary insurer toshare small exposures that it can carry itself. However, it does not conferany unearned premium relief, which small insurers might need. In a surplus contract, only the portion of the risk exceeding thecompany’s retention is reinsured, leaving the company with a homogeneousportfolio. The ceding company can keep more profitable business, and thereinsurer takes on a higher share of the less-secure risks. However, thereinsurer pays the ceding company lower commissions than under quota-sharetreaties, and administrative costs are much higher.
Excess-Loss Contracts Excess-loss (XL) contracts are different from pro-rata contracts inthat the ceding company and the reinsurance company do not share theinsurance coverage, premium, and losses in the same proportion. In fact, noinsurance amount is ceded under an excess-loss contract. The reinsurer isnot directly concerned about the original rates charged by the cedingcompany. It pays the ceding company only when the original loss exceedssome agreed limit of retention. Usually, the ceding company pays the reinsurer a premium related tothe nature and extent of the coverage assumed by the reinsurer, and nocommission is paid to the ceding company. This is called the burning-cost
system. The burning cost is a percentage calculated by dividing totallosses above the excess point in a period by the premiums for the sameperiod. A maximum rate and a minimum rate are applied, and a depositpremium is paid. As in the retrospective premium, the final premium isadjusted at year end.Per-Risk Excess Contracts The retention under a per-risk contract is stated as a monetaryamount of loss (not an amount of loss exposure or coverage). The reinsureris liable for any loss amount greater than the retention stipulated in thecontract. This amount is often subject to a limit, for example $200,000 inexcess of $50.000, under this type of treaty, the reinsurer pays all lossesexceeding a deductible. As long as they do not overlap, more than oneexcess-loss treaty may cover the same business. Reinsurers risk excess treaties are effective in providing largeline capacity, since they suffer large losses. They are also effective instabilizing loss experience. In the part run, a primary insurance companycan even improve the results of an intently unprofitable business throughexcess reinsurance. However, the reinsurance will probably refuse to renewparticipation, and the primary insurer will pay more for any futurereinsurance. In health insurance, per risk could have several meanings. Insurersmay face creasing exposure to major claims arising from a specific medicaltreatment, which explains the growing demand for reinsurance to cover therisk of very expensive treatments. However, a claim in health insurance isdifficult to define because the distinction between a new illness and theconsequences of an ongoing, illness is problematic. Coverage is often basedon all treatment a person receives in one calendar year.
What is nontraditional (financial) reinsurance? Instead of limiting their business to traditional methods ofassuming and financing risks in isolation, reinsurers have developedfinancial products that blend elements of reinsurance, insurance, andcapital markets. These products are based on alternative risk-transfersolutions with longer-term and more comprehensive forms of coverage. Theobjective is mainly to protect the financial resources of the business as awhole (balance-sheet protection), as contrasted with conventional eventcoverage.
Types of Contract A reinsurance contract can be prospective, retroactive, or both.Under a prospective contract, the ceding company pays the assuming companya premium in return for indemnification against loss or liability relatingto events that occur after the contract’s effective date. Under aretrospective contract, the ceding company pays the assuming company apremium in return for indemnification against loss or liability resultingfrom events that have already occurred. This reinsurance practice, calledloss-portfolio transfer, has become very popular. By definition, the insurance risk involves uncertainties about theultimate amount of any claim payments (the underwriting risk) and theliming of these payments and the timing of this payment. A reinsurancecontract is an agreement between the ceding company and the assumingcompany whereby the latter assumes all or part of the insurance risk.Contracts that do not transfer underwriting risk are referred to asfinancing arrangements or financial reinsurance. Historically, financial reinsurance took the form of retrospectivereinsurance covering catastrophe losses and past experience. Today, theprimary focus is on prospective products, which are a mixture of bankingand 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 offuture investment income as a pricing consideration. Nontraditlonal solutions generically referred to as alternativerisk transfer (ART), meet insurers’ needs for long-term planning andbalancing cash flow and resources. Coverage is limited over the entire,multiyear term of the treaty, and risk transfer is less significant thanthe 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 volatileunderwriting results during the contract period. It is a type of coveragethat combines risk transfer with a profit-sharing relationship betweenreinsurer and client. Finite risk involves a limited transfer because theclient ultimately pays for most of the losses through premiums andinvestment income. The reinsurer’s risk lies mainly in the untimely paymentof losses (timing risk). The multiyear nature of the contract allows thereinsurer to use the time value of the money and to spread losses overseveral years. This means that the client effectively trades today’sunderwriting income for tomorrow’s investment income. In finite-risk reinsurance, insurers ate reimbursed a substantialportion of the profits accruing over a multiyear period. Coverage underfinite reinsurance products is generally broad, without the list ofexclusions in traditional products. Among the most popular new forms of ARTare finite quota shares, which apply to business in current and futureunderwriting years, and spread-loss treaties, which are used to managefinancial risks associated with payment time. Aggregate stop-loss on a prospective basis is becoming a popularform of finite-risk reinsurance. It is used to address a client’s exposureto a low-probability, high-severity event. In the case of potentialcatastrophe risks, the excess loss risk is partially retained by thereinsurer, and the remainder is transferred to the capital markets viasecuritiration through event-linked bonds or derivatives. Risk-sharingpartners in capital markets have been attracted to assuming insurance risksbecause they are uncorrelated with the price movements of the stocks andbonds that comprise a traditional investment portfolio.
What principles govern a reinsurance program? The first step in creating a reinsurance program for an insurancecompany is choosing a correct of net retention and the limits ofreinsurance company. If net retention is too low, the insurer’s capital and surplus arenot put to effective use. Low retention probably means lower underwritingresults and investment income but also shows a lack of involvement on theinsurer’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 arisk 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-managementcapacity, stabilization against fluctuations, and protection againstcatastrophe risks—will all be needed at different times in a company’sdevelopment. Thus, far from being cast in concrete, the reinsurance programhas to adapt as the company’s needs change.Insurability Some insurability problems are peculiar to the health insurancebusiness. To be financially viable, insurance rates must be compatible withprojected losses, and the lack of reinsurance or the inability to reinsureoften boils down to incompatibility between the reinsurance rate and thedirect rate, which is too low to make a profit or to break even. • The low value-high frequency of some risks may raise premiums tothe point where coverage may not be affordable. • The high loss variance and propensity toward catastrophe lossesfrom specific risks may also make rates unaffordable and increase theinsurer’s dependence on reinsurance. • High premiums may discourage participation as well as increasemoral hazard and adverse risk selection.Risks with poor insurability profiles are sometimes initially written at aloss in order to build capacity. Inferior risks are frequently covered forsocial development or political reasons. This is not insurance orreinsurance problem, however, arid will not be further considered here.
Reinsurance Costs In pro-rata treaties, the ceding commission paid by the reinsurerto the ceding insurer varies according to the reinsurer’s estimate of theloss ratio to be incurred and the premium volume ceded under the treaty. Itusually covers the primary insurer’s acquisition expenses without providinga long-term commission “profit” or incentive to the insurer to cede alarger amount of business than necessary. Retrospective (profit-sharing)commission arrangements are common.In excess-loss treaties, the rate-setting procedure is more complicatedbecause the reinsurer expects long-term profitability. However, marketcompetition in reinsurance often drives reinsurance rates below the“normal” rate. The rate is usually defined as the expected losses dividedby the premium volume (the burning cost) and multiplied by a profit margin.When the primary company’s net retention increases (a similarity with thedeductible clause), the rate also declines.In financial reinsurance, an account is established at the start of afinite arrangement that is maintained according to a specific formulathroughout the life of the contract. Over time, the account fluctuatesaccording to experience under the contract. Coverage under finitereinsurance is generally broad and, at the beginning of the term, theinsurer may pay a higher premium which, in addition to the customaryreinsurance procedure, is invested and earns interest over a multiyearperiod. Projected investment income is taken into account in calculatingthe future premium. Over time, in a limited-loss situation, finiteinsurance can cost much less than traditional products. However, in case ofcatastrophe risks, when the primary insurer sustains a loss, finite-riskproducts afford less protection than does traditional reinsurance.
What do community-based health insurance funds need? Rarely can microinsurance units constitute a perfectly balancedportfolio, cither because their business volume is too small or because therelatively large risks they cover acquire a disproportionate influence onthe portfolio. Furthermore, sometimes a variety of related insured eventscause 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 functionsof reinsurance are all needed at different times in a company’sdevelopment, and the principles of a reinsurance program apply to allcommunity-based health insurance funds. Different types of contracts offer community-based reinsurancefunds 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 andclaims patterns. For schemes with a high social-welfare component and nodemonstrable commercial viability at the beginning of their operations,traditional reinsurance is unlikely to be available. Finite-risk productsappear to be a viable solution here because the underwriting result istraded over a longer investment period.However, traditional reinsurance may still be useful with a very highfranchise to cover catastrophe risks. A catastrophe severe enough for ahigh franchise to be reached occurs only once in a while, and the risk canbe commercially assessed.Substitute for Own FundsSubstantial own funds are traditionally viewed as the mark of a healthyfinancial position, but using own funds to cover peaks in risk is notrecommended. Reinsurance will serve as an aid to financing, especially fornewly established insurance companies, because in the case of finite quota-share treaties, for example, the reinsurer shares proportionally both incosts and the formation of actuarial provisions. Many of the insurance
schemes implemented so far in developing countries for small groups andrural populations have not been financially self-sufficient and may requiresubsidization of premiums, administrative expenses, or both.How does a reinsurance program work? Reinsurance assists the functioning of the law of large numbers intwo ways. First, reinsuring a large number of primary insurers allows areinsurance company to diversify risk in a way that a single insurercannot. This can be done by allowing primary insurers to underwrite alarger number of loss exposures, by improving geographical spread, and byreducing the effective size of insured exposures. Reinsurance plays a different financial intermediation role from apure brokerage in several ways: • It provides a mechanism for allocating funds to the mostefficient premium capacity. • It enables risks to be diversified and transferred from ultimateinsurers. • It enables changes to be made in the structure of insuranceportfolios. These considerations apply equally to national and internationaltransactions, irrespective of the actors’ geographical location. Thepresumption must be that efficiency in reinsurance intermediation isenhanced to the extent that agents have access to a global system ofuniversal information about worldwide options, transaction costs, exchange-rate uncertainty, and any extra risk dimension in sovereign exposure.
Conclusion Insurance companies everywhere, regardless of type and size, usereinsurance. It is a mechanism that allows an insurance company to sharethe assumed risks with others, so as to improve the spread and moderatefluctuations in the net results. The reinsurance functions and methods explained in this summaryapply equally to small community-based health insurance funds. The fourfunctions – financing, capacity, stabilization and catastrophe protection –are all needed to protect a company’s development. Nontraditionalreinsurance or finite-risk reinsurance are well suited to the company. VOCABULARY
|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 |SYNONYMS
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 luck; 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. QUESTIONS
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 reinsurance? 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 contracts? 20. In what document are forwarded all details of every risk ceded to the reinsurer? LITERATURE