Swiss Re Publishes “Understanding Reinsurance”

Swiss Re has released a study, entitled “Understanding reinsurance: How reinsurers create value and manage risk,” which highlights the role of reinsurance as one of the major risk and capital management tools available to insurance companies.

The study explains how reinsurance benefits buyers of reinsurance by reducing the volatility of their underwriting results, providing capital relief as well as facilitating access to reinsurers’ expertise and services. Swiss Re stressed that the “role of reinsurance in making the insurance industry more stable and attractive is thereby underlined. In addition, the study describes how reinsurers use risk management systems to guarantee that the capital base and the risks assumed are aligned, thus ensuring the long-term survival of the reinsurance company.”

Swiss Re said it has designed the publication, “as a background paper for a broad audience: supervisors, regulators, parliamentarians as well as members of industry associations, clients, investors and the media. It is written in non-technical language and provides the reader with a deeper understanding of how reinsurance operates and its important place in the overall economy.”

The introduction to the new study points out that “reinsurance is one of the major risk and capital management tools available to primary insurance companies. It is, however, hardly known outside the insurance sector.” The study aims to correct that by explaining to a broader audience “the essentials of reinsurance.” It describes the principles of both life and non-life reinsurance; why insurers benefit from buying reinsurance cover and how reinsurers deal with risk.

Swiss Re said it “concludes with an overview of the general framework needed for reinsurance to function efficiently.”

The study may be downloaded (in English) on the company’s Web site at: www.swissre.com.