Reinsurance is used by insurance companies to transfer some of their risk to other parties. The company willing to accept the risk is known as the reinsurer and the company transferring the risk is known as the “ceding company”. The reinsurer agrees to indemnify the ceding company against some of the primary insurance risks underwritten by the ceding company under one or more insurance contracts. The ceding company pays a premium to the reinsurer and in return it will receive a payment if specified event occurs. Examples include extensive damage from flooding and earthquakes.
Consolidation in the Reinsurance Industry
Implications of a Stronger US Dollar
The US dollar is experiencing steady growth: not only has the dollar steadily improved over the last four years, but it rose thirteen percent in 2014 and an additional five percent in the first part of 2015. This recent strength can be attributed to the implementation of quantitative easing by the European Central Bank (“ECB”) and aggressive stimuli from central banks around the world including the ECB and the Bank of Japan.