Ghana Re and Continental Re has affirmed their dual role as key players in the reinsurance space in the African continent and believe that by collaborating to organise practical services and training programmes aimed at enhancing technical capacity of business partners, they can foster growth of the insurance industry, especially in the sub-region.
Ghana Re’s Head of Technical Operations, Dr. Kwaku Appiatu-Ankrah, noted that by collaborating to organise practical seminars and training programmes, they would improve technical capacity for business partners in order to foster growth, especially in the insurance industry.
Speaking during a short ceremony to kick-start the joint seminar on the theme ‘Developing and Executing Reinsurance Treaties’ at Rockcity Hotel, Nkwanta–Kwahu last Monday. Dr. Kwaku Appiatu-Ankrah reaffirmed the greater aspect of the industry development of reinsurance treaties.
He indicated that not only does a good reinsurance programme safeguard the financial stability of insurance companies, but it also ensures resilience of the operations in the face of unforeseen risks. Reinsurance programmes are essential tools that enable the spreading of risks, protecting capital and maintaining the confidence of stakeholders.
“Over the seven days, resource persons will take part through how to develop and execute treaties to meet strategic goals, market conditions and regulatory compliance,” Dr. Appiatu-Ankrah explained.
“Moreover, our resource persons have a wealth of knowledge in the subject area and bring to the fore a combined expertise of over 30 years and experience of dealing in different markets. We are confident that at the end of this seminar, participants would have a better appreciation of the subject area.”
Ogadi Onwuaduegbo, Regional Director – Continental Reinsurance Company PLC, stressed that collaboration between the two leading reinsurance companies is very crucial to sustainable insurance business in the sub-region. He further indicated that the two companies are currently doing very well in Africa.
Dr. Kwaku Appiatu-Ankrah, the lead resource person, started the day with the legal definition of reinsurance. Reinsurance is essentially a specialist form of insurance transacted between professionals; hence, many of the principles and practices applying to the conduct of insurance business equally apply to reinsurance. However, some principles have a different application in reinsurance.
A legal definition of reinsurance was given by Lord Mansfield in the case of Delver v. Barnes (1807) that reinsurance “consists of a new assurance, effected by a new policy, on the same risk which was previously insured in order to indemnify the underwriters from their previous subscription; and both policies are in existence at the same time”.
Simple definition of reinsurance
The legal definition relates to facultative reinsurance, which was the earliest form of reinsurance.
It cannot be said all forms of reinsurance satisfy Lord Mansfield’s requirement that ‘both policies are in existence at the same time’ because with the development of treaty contracts, ceding companies have a blanket authority, within certain agreed criteria, to cede future risks underwritten.
A simple definition of reinsurance, therefore, is that “it is the acceptance by an insurer, known as a reinsurer, of all or part of the risk or loss of another insurer, called the ceding company”.
What is reinsurance?
The purpose of reinsurance is the same as that of insurance to provide security.
Reinsurance is a mechanism available to an insurer for the transferring of risk beyond its capacity, reducing its risk to an acceptable level.
The reinsurer agrees at a premium to assume to an extent losses suffered by the ceding company under its original policy.
Reinsurance is a long-term relationship so that in periods of calm they share in the profitability of the reinsured and in period of catastrophe they support the reinsured, stand by them and neutralise the damaging impact of large losses.
Reinsurance is international in character; therefore, local risks must be reinsured internationally. Local reinsurance means market retention of risks with spiral impact of losses. Also, insurance markets are cyclical in nature so reinsurers abroad are not directly affected by bad cycles of a local market.
They remain stronger to meet their obligations to the reinsured who are directly affected by the bad cycles of their own markets. Capacity providing reinsurers extend their financial strength to the reinsured who write risks beyond their own financial strength.
Difference between insurance and reinsurance
When we define reinsurance, we often say it is a type of insurance for insurance companies themselves. This statement gives the impression that the reinsurance contract is very similar to the insurance contracts which individuals enter into. This is not completely true.
Let us take a closer look at some of the differences
- Customer base
- Motive
- Regulation
- Financing Mechanism
- Risk factors
