Seeking for safety has always been a natural
human instinct. Everyday, we go back to our homes that shield us from the rain
and heat, we avoid dangerous sites on our travels — and we do the same with our
money too. We keep our money in banks or invest into funds and most importantly,
buy insurance to provide us with financial security in the face of emergencies.
Purchasing insurance is the most common risk transfer mechanism as it protects
us against financial risks from the uncertainties in life. What are
Insurance
Companies
There are various types of insurance in the
market offering different products to a wide range of customers. The most
common insurance products are motor insurance, health insurance, life insurance,
and property insurance. Insurance is sold through a variety of channels,
including face-to-face by insurance agents and brokers, over the internet, in
workplace programs and through corporate affiliations. Insurance companies
collect premiums from policyholders in return for insurance claims in the face
of unforeseen events.
Underwriters
An underwriter facilitates risk evaluation
processes to help an insurance company decide whether providing coverage to a
consumer or business would be profitable. The underwriting process aims to
reduce underwriting risk, which refers to the potential loss that impacts the
financial health and profitability of the insurer. Whenever an insurance claim
arises, the underwriter needs to evaluate the premium received and determine
the number of claims paid out to ensure profitability. To do so, they use
statistics, future projections and trends to produce a comprehensive report.
This underwriting practice is crucial in all kinds of insurance.
Reinsurance
Companies
Reinsurance is the practice whereby insurers
transfer portions of their risk portfolios as stated in an agreement to other
parties in the secondary insurance market. This process is presented as a legal
transaction between two parties, namely the ceding party and the reinsurer, to
diversify its insurance portfolio and reduce risk of paying large obligations
that arise from claims. There are two basic types of reinsurance arrangements.
Treaty reinsurance binds the insurer and reinsurer together, as it requires the
insurer to cede all the risks specified in an agreement with the reinsurer,
instead of just one particular policy. On the contrary, facultative reinsurance
is done on a case-by-case basis based on analysing individual cases.
* * *
Malaysian Reinsurance Berhad (Malaysian Re) – a
wholly-owned subsidiary of MNRB Holdings Berhad – is the largest national
reinsurer (by asset) in Southeast Asia. The Company has an extensive portfolio
of business expertise and underwrites all classes of general reinsurance business
as well as general and family retakaful businesses. Head over to https://www.malaysian-re.com.my/ to learn more about the
reinsurance industry.