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International Insurances and Reinsurances
The Faculty of International Business and Economics
the 2
nd
year of study
the Academy of Economic Studies - Bucharest
Course 1: Theoretical Approach of
International Insurances &
Reinsurances
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Course 1: Theoretical Approach of
International Insurances & Reinsurances
SUMMARY
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1. Origin & evolution
2. Need of protection
3. Risk spread types of protection
4. Functions of insurance & Reinsurance
5. Risk and chance
6. Classification of insurance
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Merchants
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1. Origin & Evolution
3000 BC Chinese, Babylonians
IX BC Greeks, Romans
Marine Insurances
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Course 1: Theoretical Approach of
International Insurances &
Reinsurances
SUMMARY
Copyright 2006 AchieveGlobal , Inc.
1. 1. Origin & evolution Origin & evolution
2. Need of protection
3. 3. Risk spread Risk spread types of protection types of protection
4. 4. Functions of insurance & Reinsurance Functions of insurance & Reinsurance
5. 5. Risk and chance Risk and chance
6. 6. Classification of insurance Classification of insurance
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2. Need of protection
For persons
For companies
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Course 1: Theoretical Approach of
International Insurances &
Reinsurances
SUMMARY
Copyright 2006 AchieveGlobal , Inc.
1. 1. Origin & evolution Origin & evolution
2. 2. Need of protection Need of protection
3. Risk spread types of protection
4. 4. Functions of insurance & Reinsurance Functions of insurance & Reinsurance
5. 5. Risk and chance Risk and chance
6. 6. Classification of insurance Classification of insurance
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3. Risk spread types of protection
Insurance
Coinsurance
Auto-insurance
Reinsurance
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The mechanism of insurance, coinsurance, reinsurance & retrocession
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POOL
The insurers
benefit
from the law of
What is insurance?
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Equitable Premiums

Claims

The contributions of the many to meet the losses of the few

from the law of
large numbers
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Insurance Market
Those who seek to
buy insurance
Those who seek to
sell insurance
General Public
Insurance Companies
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Intermediaries
Lloyd's Brokers
Consultants
Agents
General Public
Groups
Companies
Insurance Co.'s
Reinsurance Co.'s
Insurance Companies
Lloyd's of London
Reinsurers
Government
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The Underwriting Process
CLIENT
BROKER
UNDERWRITER
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Terms and Conditions
UNDERWRITER
Decline
Accept
Premium
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The Underwriting Process
CLIENT
PRODUCING BROKER
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LLOYDS
BROKER
OVERSEAS
DOMESTIC
MARKET
LONDON
MARKET
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Coinsurance
The Direct The Direct
Insured (oil co.) Insured (oil co.)
(100%)
BROKER
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Co.A Co.A
30% 30%
Co.B Co.B
20% 20%
Co.C Co.C
20% 20%
Co.D Co.D
15% 15%
Co.E Co.E
15% 15%
Coinsurance Coinsurance
BROKER
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Reinsurance
The Direct The Direct
Insured (oil co.) Insured (oil co.) (100%)
BROKER
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Co.A Co.A
30% 30%
Co.B Co.B
20% 20%
Co.C Co.C
20% 20%
Co.D Co.D
15% 15%
Co.E Co.E
15% 15%
Coinsurance Coinsurance
BROKER
Reinsurance
50% of 30%
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Reinsurance
Reinsurance
Facultative Treaty
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Facultative Treaty
Proportional Non-Proportional
Quota Share Surplus Lines Excess of Loss Stop Loss
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Direct Insured Direct Insured
Contract of Contract of
Insurance Insurance
Reinsurance Relationships
Insurer Insurer
Reinsured or Cedant Reinsured or Cedant
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Reinsurer Reinsurer
Retrocedant Retrocedant
Retrocessionaire Retrocessionaire
NB NB Privity of contract in each case! Privity of contract in each case!
Contract of Contract of
Reinsurance Reinsurance
Contract of Contract of
Retrocession Retrocession
Reinsured or Cedant Reinsured or Cedant
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Insure Me
Quotation
How the Intermediaries Place Business
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Placement
Accounting
Documentation
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Independent Intermediary
identify best market
negotiate terms & conditions
advice re policy wording
collect premiums

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advise re claims
uninsured loss recovery
granting cover
issuing cover notes
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Course 1: Theoretical Approach of
International Insurances &
Reinsurances
SUMMARY
Copyright 2006 AchieveGlobal , Inc.
1. 1. Origin & evolution Origin & evolution
2. 2. Need of protection Need of protection
3. 3. Risk spread Risk spread types of protection types of protection
4. Functions of insurance & Reinsurance
5. 5. Risk and chance Risk and chance
6. 6. Classification of insurance Classification of insurance
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4. Functions of insurance & Reinsurance (I)
Functions of insurance
Financial compensation of losses
To prevent the losses
Financial function
Saving
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Saving
Reduction of the administrative costs
The development of the services - invisible trade
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4. Functions of insurance & Reinsurance (II)
Functions of reinsurance
Protection of the direct insurers
To get a stability of losses
High risks spread
Higher flexibility of the insurer
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Higher flexibility of the insurer
Higher capability of risks subscription
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Course 1: Theoretical Approach of
International Insurances &
Reinsurances
SUMMARY
Copyright 2006 AchieveGlobal , Inc.
1. 1. Origin & evolution Origin & evolution
2. 2. Need of protection Need of protection
3. 3. Risk spread Risk spread types of protection types of protection
4. 4. Functions of insurance & Reinsurance Functions of insurance & Reinsurance
5. Risk and chance
6. 6. Classification of insurance Classification of insurance
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The Meaning of Risk
480TURBO
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The Insured Object
The Peril Insured Against
The Probability of Loss
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Risks for insurers
To be calculated
Not to be avoided
Not to be aware of them
To be afforded
To be compensated
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To be compensated
To be included within a contract
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Nature Of Perils
EXCLUDED Perils: An exception, or exclusion under the policy
UNINSURED Perils: Just not mentioned under the policy
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INSURED Perils: Things covered under the policy
Under the policy there
are three possibilities,
see above
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Risk Management
Identification
Evaluation
Frequency
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Economic Control
Severity
Physical Financial
Pre loss Post loss Retention Transfer
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Course 1: Theoretical Approach of
International Insurances &
Reinsurances
SUMMARY
Copyright 2006 AchieveGlobal , Inc.
1. 1. Origin & evolution Origin & evolution
2. 2. Need of protection Need of protection
3. 3. Risk spread Risk spread types of protection types of protection
4. 4. Functions of insurance & Reinsurance Functions of insurance & Reinsurance
5. 5. Risk and chance Risk and chance
6. Classification of insurance
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Classes of Insurance
+
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Marine
Aviation
Motor
Non-marine
Property
Non-marine Casualty
Life
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Classification of insurance (I)
Criteria:
Type of insured risks:
Life
Non-life
Legal report:
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Legal report:
Compulsory
Optional
The object of insurance:
Property insurance
Personal insurance
Liability insurance
Financial insurance
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Classification of insurance (II)
Insured risks
Environmental risk
Risk of accident
Risk of liability
Risk of death
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Covered territory
Domestic
External
Type of reports
Direct
Indirect
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Main Classes of Insurance
GENERAL NON-LIFE
1. Transportation Insurances
2. Property
3. Pecuniary
4. Liability Insurance
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4. Liability Insurance
5. Health Insurances
6. Package insurance
LIFE
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Main Classes of Insurance
GENERAL NON-LIFE
1. Transportation Insurances
Motor
Marine
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Marine
Aviation
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Main Classes of Insurance
GENERAL NON-LIFE
2. Property Fire & Special perils
Theft
Money
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Money
Engineering
Glass
Goods in transit
All Risks
Livestock
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Main Classes of Insurance
GENERAL NON-LIFE
3. Pecuniary
Fidelity guarantee
Legal expenses
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Legal expenses
Credit
Business interruption
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Main Classes of Insurance
GENERAL NON-LIFE
4. Liability Insurance
Employers liability
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Employers liability
Public liability
Products liability
Professional indemnity
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Main Classes of Insurance
GENERAL NON-LIFE
5. Health Insurances
Personal Accident
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Sickness
Medical expenses
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Main Classes of Insurance
GENERAL NON-LIFE
6. Package insurance
Travel insurance
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Traders combined
Household
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Main Classes of Insurance
II. LONG TERM INSURANCES
Life Assurance
Term Assurance
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Whole Life
Endowment
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Course 1: Theoretical Approach of
International Insurances &
Reinsurances
SUMMARY
Copyright 2006 AchieveGlobal , Inc.
1. 1. Origin & evolution Origin & evolution
2. 2. Need of protection Need of protection
3. 3. Risk spread Risk spread types of protection types of protection
4. 4. Functions of insurance & Reinsurance Functions of insurance & Reinsurance
5. 5. Risk and chance Risk and chance
6. 6. Classification of insurance Classification of insurance
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Thank You!
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Copyright 2006 AchieveGlobal , Inc.
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International insurance market