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Reinsurance in Plain English

Reinsurance represents one of the largest, if not the largest, purchase an insurance company makes annually. It is intentionally made nebulous by the reinsurance sales industry that makes commissions based on how much reinsurance it can sell you.

It was the courts that stated in 2013 that "Reinsurance is a dauntingly complex, esoteric field of business and the briefs in this case are correspondingly complex and esoteric...The lawyers' oral arguments were excellent. But their briefs, although well written and professionally competent, were difficult for us judges to understand because of the density of the reinsurance jargon in them. There is nothing wrong with specialized vocabulary--for use by specialists. Federal district and circuit judges, however, with the partial exception of the judges of the court of appeals for the Federal... [more]

 

Mamas, Tell Your Kids to Sell Reinsurance

In the article "40 Hours and I'm an Insurance Agent," we caught a glimpse of the dismaying reality that it takes 15 times the education to be a manicurist in the author's state than it does to be an insurance salesman.

Now comes the additional shocker that to sell reinsurance and to operate under the reinsurance intermediary's license, the individual selling this reinsurance needs to have zero ducation, zero testing and zero personal proficiency licensure. There is no educational requirement, no testing, no continuing education requirement and no ethical code. There is not even a floor for reinsurance salesmen's professional requirements, much less any lofty standards. How, then, are they to be taken seriously or considered professionals?

Willie Nelson's song should be changed. His advice to mamas in an old song was, "don't let... [more]

 

Cat Reinsurance 101

Most ceding companies avail themselves of catastrophe reinsurance, a product that pays anywhere from 90 to 100% of aggregated event loss after the ceding company’s retention up to the limits obtained. Generally the retention is determined as some fraction of the company’s surplus and the exposure profile of the company from any one catastrophe. The ceding company wants that retention high enough to not merely be swapping dollars with the reinsurer for frequency events, but low enough that the “shock” of the sudden demand for cash to pay claims does not impair the company.