Analyze Re – applying Cap Mkts tech to bring reinsurance underwriting into the 21st century
The $500bn reinsurance industry provides insurance for the insurers. In this market it is all about premiums and risk and the relationship between them, defined as the loss ratio. Like primary insurance, reinsurance is a mechanism for spreading risk. Reinsurers takes some portion of the risk assumed by the primary insurer in return for a premium.
However, here the similarities end. Where reinsurance differs from primary insurance is that each policy or contract is individually priced. Each contract is unique and there is no place for the law of big numbers or the pooling of shared risk. There is no average price in reinsurance.