Reinsurance

As we all know, sharing is caring. From the moment we can physically hold an item, we are told, reminded, and sometimes scolded that we need to share with others. Even now, you might be reminded to ‘like and share’ content on social media, or feel judgment from a ‘sharing bag’ of M&Ms that you eat by yourself. As we’ve already seen, insurance started as a way to share risk: ship owners would huddle together in Lloyd’s coffee shop and, if there was a shipwreck, all would share in the financial loss. Nowadays, policyholders often wish to transfer the majority of the risk to the insurer rather than share it as equals, although most insurance policies require that policyholders retain a small bit of the risk through the use of policy excesses or deductibles. Insurers take on risk, but even they have a limit as to how much they want to take on. They may have inadvertently written too many policies, be very exposed to potential large losses, or perhaps they were unable to find enough similar risks to create a pool in the way they hoped. Is there someone who would insure the insurer?