Re-Insurance
Overview
Who insures the insurer? When a Lagos company accepts a fire risk on a ₦2 billion refinery, it cannot afford to pay that claim alone if the plant burns down. So it does exactly what its own customers do: it passes part of the risk to someone bigger. That someone is a reinsurer, and the arrangement is called re-insurance, the quiet machinery that lets ordinary insurers safely accept risks far larger than their own pockets.
In this lesson you will learn what re-insurance really is and how it moves risk from one insurer to another, the difference between facultative and treaty cover, and how a single risk is carved up under quota share and surplus treaties. You will work through the splits examiners set, see why re-insurance is not the same thing as co-insurance, and meet the reinsurers that keep the Nigerian market standing.
Objectives
- Define re-insurance and explain how it transfers risk from one insurer to another
- Distinguish facultative from treaty re-insurance
- Explain the functions of re-insurance, including capacity, stability and catastrophe protection
- Describe the uses of re-insurance in the Nigerian insurance market
- Distinguish re-insurance from co-insurance
Lesson Note
Sign Up to Continue
Create a free account to access all learning resources, practice questions, and track your progress.
Lesson Evaluation
Congratulations on completing the lesson on Re-Insurance. Now that youve explored the key concepts and ideas, its time to put your knowledge to the test. This section offers a variety of practice questions designed to reinforce your understanding and help you gauge your grasp of the material.
You will encounter a mix of question types, including multiple-choice questions, short answer questions, and essay questions. Each question is thoughtfully crafted to assess different aspects of your knowledge and critical thinking skills.
Use this evaluation section as an opportunity to reinforce your understanding of the topic and to identify any areas where you may need additional study. Don't be discouraged by any challenges you encounter; instead, view them as opportunities for growth and improvement.
- Re-insurance is best described as: A. The sharing of one risk among several insurers who all face the insured B. The transfer by an insurer of part of a risk it has accepted to another insurer C. The payment of a claim by instalments D. Insurance taken out by a member of the public Answer: B
- In a re-insurance transaction, the insurer that passes on the risk is known as the: A. Reinsurer B. Ceding company C. Retrocessionaire D. Lead insurer Answer: B
- An insurer holds a 30 per cent retention, 70 per cent cession quota share treaty. On a claim of 20,000,000 naira, how much does the reinsurer pay? A. 6,000,000 naira B. 14,000,000 naira C. 20,000,000 naira D. 7,000,000 naira Answer: B
- Which type of re-insurance is obligatory, so that the insurer must cede and the reinsurer must accept every qualifying risk automatically? A. Facultative B. Treaty C. Retrocession D. Co-insurance Answer: B
- The process by which a reinsurer re-insures part of a risk it has accepted with another reinsurer is called: A. Retention B. Co-insurance C. Retrocession D. Subrogation Answer: C
Sign Up to Continue
Create a free account to access all learning resources, practice questions, and track your progress.
Sign Up to Continue
Create a free account to access all learning resources, practice questions, and track your progress.
Recommended Books
Past Questions
Wondering what past questions for this topic looks like? Here are a number of questions about Re-Insurance from previous years
Question 1 Report
Explain the following terms as used in insurance.
(a) re-insurance
(b) Loss adjusters
(c) underwriters
(d) brokers
(e) assessor
Sign Up to Continue
Create a free account to access all learning resources, practice questions, and track your progress.