Insurance vs Reinsurance

Jetpak (Harri Watson) - Insurance and reinsurance are the same in concept. These two are both tools that protect you from big losses whether where part of the world you are at, U.S in the West or in SE Asian countries like KL Malaysia, Beijing China, Singapore or Jakarta Indonesia. While there are also some difference, insurance is a protection for the individual and the premium that is paid by an individual will be received by the company that provides the insurance, whereas reinsurance is the protection taken out by a big insurance firm to ensure that they survive great losses and the insurance premium paid for reinsurance will be divided among all the insurance companies in the pool that bear the risk of loss. Axis Capital, a group of companies based in Bermuda with 29 branches worldwide including the United States, provides customized insurance coverage and reinsurance coverage.

As mentioned above, insurance and reinsurance are both forms of financial protection which are used to guard against the risk of losses. Losses are protected against by shifting the risk to an alternative party via payment of an insurance premium, as an incentive for acquiring responsible for the risk. Insurance and reinsurance are alike in notion despite that they are pretty dissimilar as compared in regarding how they are used.

Insurance is a generally recognized concept that defines the form of protecting against risk. An insured is the party who will pursue to acquire an insurance policy whereas the insurer is the party that shares the risk for a paid price called an insurance premium. The insured can acquire an insurance policy with no trouble for a number of risks. The most usual types of insurance policy taken out are a vehicle/auto insurance policy as this is mandated by law in many countries. Some policies comprise home owner’s insurance, renter’s insurance, medical insurance, life insurance, liability insurance, etc.

Reinsurance is when an insurance company will protect themselves from the threat of loss. In a simpler term, reinsurance is the insurance that is taken out by an insurance company. Warning! As insurance companies offer protection from the risk of loss, insurance is a super uncertain business, and it is significant that an insurance company has its own defense in place to shun from bankruptcy.

By means of the reinsurance structure, an insurance company is capable of bringing together or ‘pool’ its insurance policies and then split up the risk between a number of insurance providers thus making the event that a large loss happens this will be divided up throughout a number of firms, by this means all can be saved the one insurance company from great losses.