Which Types of Life Reinsurance Policies Should Your Business Invest In?

Highlights:

• Introduction
• Different types of life reinsurance favoring several businesses
• Key acquisitions in the domain

Nowadays, insurance companies are not limited to life insurance policies only. The industry has expanded its offerings where it provides coverage for vehicles, buildings, and various other events. These days, insurance has become a mandate for everything that has enormous potential. In this field, reinsurance has emerged as a concept to offer coverage to the insurance industry. It helps protect the insurers who face excessive claims from different quarters. This concept is applied to both individuals and companies. Since insurance companies work on the principle of collective risk, only a few policyholders are expected to lodge the claims within a particular timeline. At that time, reinsurance comes into the scene. These policies help insurance companies to fulfill the claims when they are expecting larger than normal payouts.

The latest types of life reinsurance policies benefiting several businesses

There are various types of life reinsurance policies based on various needs of businesses. Proportional reinsurance is a type of treaty reinsurance in which a reinsurer is required to share a percentage of the losses under a proportional reinsurance arrangement, called “Pro Rata”. For instance, if a company claims insurance of Rs 50,000 then the reinsurer will only share a part of the claim not the total amount. This means, in this type of policy, the reinsurance company will pay only a pre-decided percentage.

While in non-proportional reinsurance arrangements, the reinsurer only pays out if the insurer’s claims exceed a certain limit. It is also known as “excess of loss” reinsurance. This kind of reinsurance arrangement mostly happens in case of a natural disaster or any accidental hazards.

Facultative reinsurance is a type of reinsurance policy that mostly covers a single transaction and is a one-time contract with the insurance company. In this type of policy, the ceding firm and the reinsurer develop a facultative certificate that states the reinsurer is going to take a specific risk in a facultative reinsurance contract.

Nonetheless, loss occurring coverage is a reinsurance policy in which the reinsurer only pays the ceding party for the losses that occur during the contract period. In this policy, the reinsurer must compensate all the losses suffered during the contract period, regardless of when the loss-generating policies were issued.

All such types of life reinsurance policies help individuals, companies, and various other firms to manage their huge portfolios, reduce potential risks, diversify their portfolio, and allow their business to grow exponentially.

Some profitable alliances that businesses in this domain should take a note of

The global life insurance market is evaluated across various regions and countries. Among several countries, India is expected to exhibit a noteworthy CAGR of 21.8% during 2023-2032. This is mainly because insurers and reinsurers in this region are reassessing their risk management strategies regularly to offer innovative solutions to address future systemic risks. However, the Rest of the Aisa-Pacific is expected to rank second in terms of growth, rising at a CAGR of 20.5% during the forecast period.  

Several players in this domain have made beneficial alliances to stay ahead in the competitive landscape. For instance, in January 2024, Obra Capital, a leading asset management firm announced its acquisition of Unified Life Insurance Company, a leading provider of life, health, annuities and reinsurance services. With this acquisition, Unified would provide Obra with immediate access to life insurance markets and strengthen its longevity footprint.

Similarly, In February 2024, Hannover Re, one of the renowned reinsurance groups in the world acquired Scottish Re Group Limited, a holding company with its principal executive office in Bermuda. With this acquisition, Hannover Re would acquire the policy administration systems of Scottish Re to support the US mortality reinsurance business, resulting a significant rise in the company’s net income. 

To conclude, the increased rate of claims in the life insurance category is expected to bring immense growth opportunities for the industry in the coming years. Moreover, the increase in focus of insurers and policyholders to stabilize losses is anticipated to fuel the growth of the sector in the future.

To gain more insights into the life reinsurance industry, feel free to talk to our industry experts today! They can also help you identify potential investment opportunities across various regions.

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