Efficiency of Reinsurance on Risk Mitigation and Profitability in Nonlife Insurance Company

Abstract

Insurance is introduced for the protection of the insuring public.  It gives protection to an individual or business from a sudden loss or unforeseen event by transferring the risk to the Insurance Company.  By paying a small amount of premium, the insured is guaranteed of a large amount of pay for a valid possible claim.  There are certain risks that can be harmful to the insurance company’s profitability; when accepting a risk, the insurance company also has to protect its welfare through proper underwriting, analyze the said risk and develop and implement a risk management procedure to reduce its exposure from a larger possible loss that may lead to the downfall of the company.  Insurance company may use its reinsurance support whether locally or internationally for a jumbo risk so as not to acquire all the burdens when a sudden loss occurred.  Reinsurance which is sharing or transferring the risk portfolio by the ceding company to other reinsurers is a way of mitigating risk.  The purpose of the study is to determine the level of efficiency by having reinsurance support in risk mitigation and the ability to protect the firm’s profitability.