The essence of financial reinsurance

Financial reinsurance means that the original insurer distributes the gains or losses of the existing business to the reinsurer, and the reinsurer bears the risks of future insurance business income. According to the contract, the original insurer pays a certain premium to the reinsurer. The reinsurer shall, according to the requirements of the original insurer, return the premium and investment income after deducting the operating expenses. The main purpose of the original insurer's purchase of financial reinsurance is to obtain comprehensive financial strength including solvency at a certain point in time, ensure its financial balance, and avoid losses or bankruptcy caused by accumulated underwriting losses or changes in other economic factors. For the reinsurer, the general financial reinsurance contract should also set the upper limit of the accumulated liability risk borne by the reinsurer and give the reinsurer the right to terminate the contract under certain conditions.