Why use reinsurance?

Munich Reinsurance Company of Canada assists our cedents by providing :

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 Withdrawal: Reinsurance provides a means for the cedent to maintain a class of risk that the company has withdrawn from due to a line of business, geographic area or production source.