Reinsurance of Third Party Motor Insurance and Motor Insurance in Finland

The need and extent of reinsurance of third party motor insurance depends fundamentally on the risk limits prescribed in the legislation of the country in question (and on the other hand the legal limits of the compulsory insurance may have been fixed with regard to the reasonable possibilities of the insurers getting reinsurance). There are two kinds of risk limits which are applied in different countries: total limits and individual limits. The former defines the maximum joint indemnity for an accident, paid to all claiments together, and the latter defines the maximum indemnity paid to each claiment separately. From the social point of view limits of this sort are not expedient, especially in regard to physical injuries. Owing to this total limit the indemnity for a single claiment can depend on the number of other claiments, which is quite inadequate from the point of view of the actual need to get insurance cover for injuries. The individual lump sum limit allows full compensation for slight injuries but can cut down the compensation for serious ones, which is an irrational method of settling an indemnity system. Owing to these risk limits motor car drivers may also be held responsible for the extra claims personally on the basis of civil (or criminal) law, which compels them to take an extra third party liability insurance (which often also has risk limits).