Why use reinsurance?
Munich Reinsurance Company of Canada assists our cedents by
|1. Underwriting Assistance: With their diverse books of
business, reinsurers can provide the technical expertise
cedents need to enter new lines of coverage or to write
risks in areas of Canada that the underwriter is not
familiar with. This helps cedents to broaden their book of
business and expand their underwriting opportunities.
|2. Capacity: Reinsurance allows the cedents to write
larger amounts of insurance. This helps solve
problems on otherwise quality accounts.
|3. Financial: Reinsurance eases the strain on the
cedent's surplus during rapid premium growth. Premiums ceded
to reinsurers are not included in the cedent's unearned
premium reserve - which is carried as a liability on the
cedent’s financial statement. As a result, the cedent’s
premium to surplus ratio is reduced and there is enhanced
ability to write business.
|4. Stabilization: Reinsurance helps smooth the
cedent's overall operating results from year to year
generated by economic, social and natural forces. It
protects the cedent's capital and surplus needed for growth
as well as a cedent’s customers, shareholders and to some
extent its employees.
|5. Marketing Tool: Reinsurance expands the cedent's
ability to assume risk. This in turn, enhances the cedent’s
image as a broad based market and a responsive insurer and
can add confidence when in an unfamiliar coverage area.
|6. Catastrophe Control: Exposure to natural
disasters, such as flooding in Manitoba and earthquakes in
British Columbia, jeopardizes a cedent's financial
integrity. Reinsurance protects the cedent against a single
catastrophic loss or multiple large losses. Reinsurance also
affords protection against casualty losses in which multiple
insureds can be involved in one occurrence.
|7. Withdrawal: Reinsurance provides a means for the
cedent to maintain a class of risk that the company has
withdrawn from due to a line of business, geographic area or