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Highlights on Reinsurance History

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Edited By André Straus and Leonardo Caruana de las Cagigas

    Despite being one of the main pillars of the insurance industry, reinsurance is little known by the general public and is rarely the focus of academic study. In this book, the authors – economic historians and experts in the field from across Europe and Japan – seek to address this by shedding light on one of the most globalized of all economic activities. In a clear and engaging manner, they reveal the history of reinsurance in both national and international contexts, aiming to illuminate this vital, but often overlooked, aspect of insurance.

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    Swedish Life Reinsurance and Risk Management (Mats Larsson / Mikael Lönnborg)

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    Swedish Life Reinsurance and Risk Management

    Mats Larsson & Mikael Lönnborg

    Introduction

    The purpose of the reinsurance industry is to provide insurance for primary insurers. The latter party cover life and non-life risks among corporations and individuals through different technical calculations. In the field of life insurance, insurers makes estimations based on mortalities tables, the current and possible future interest rates and operation costs, and sometimes on medical judgements of individual persons, to set the premium. In some cases people are considered to be a higher risk than average and are refused to sign an insurance contract, but other insurers might to an increased premium also cover these so-called substandard risks.

    Primary insurers have fairly standardised policies, whereas those of reinsurers are often less so, more internationally oriented and likely to cover very large risks. There is little doubt that primary insurance policies, as well as an insurance market based on fixed premiums, would be difficult to sustain over the long run without reinsurance. Reinsurance enables portfolio diversification by the primary insurer in order to avoid the kinds of devastating losses that could threaten its survival1.

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