Does Insurance company also needs to be insured? - Letsdiskuss
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Posted 19 Feb, 2019 |

Does Insurance company also needs to be insured?

Devang Verma

student | |Updated 11 Mar, 2019

      Its really fascinating when we find out that a doctor is being treated by another doctor, or a lawyer fighting another lawyer’s case. In the same way can we think that a company which provides us with insurance can also seek for one. Yes it does happen.

Insurance companies are also taking risks in due course of business. They have to reimburse claims as and when they occur. They cannot be sure when the claim will occur and how big that claim can be. This is so because of the unresolved nature of perils. Insurers are normally financially sound enough to be able to reimburse claims. But there are limits. An event like the tsunami or earthquake may generate claims amounting to crores of rupees, which may put a very heavy strain on the reserves of the company/insurer. Insures protect themselves from such situation, which may be beyond their capacity, by reinsuring the risks with other insures. If the event occurs and claim is to be reimbursed then the burden is shared by the primary insurer and the reinsurer.
   For example, there are some companies which are exclusively in the business of reinsurance. For example, the general Insurance corporation of India is the national reinsurer. So when there is a major calamity, the claims affect several insurers all over the world , through the system of reinsurance.