eli5: Who insure reinsurance companies?

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As per title, do reinsurance companies get themselves insured? If not then how do they handle the risks of reinsuring insurance companies?

In: Economics

2 Answers

Anonymous 0 Comments

A major part of an insurance companies work is actual risk assessment. This is done by modelling many different types of events and situations beforehand. A good example is forest fires and climate change. Both are separate models usually but for a re-insurance company they become one and get modelled together based on both historical data and prediction models.

So they themselves dont have extra insurance but tackle the major burden of running many more models and predictive systems than a regular insurance company. You could call them much more a scientific company than a regular insurance company.

Anonymous 0 Comments

Other insurers, should they choose to do so. Insurers can offer both Direct insurance and Reinsurance.

To a reinsurer, the company they are insuring (a “cedent”) is, at its most basic, like any other policy holder – the reinsurer is just covering part of the claim the cedent has to pay.

Actually not too dissimilar to standard motor insurance where the policyholder is liable for vehicle damage.