In what circumstances do life assurance companies need reinsurance for a submitted life assurance policy?

Question

Essentially, when do insurance companies need reinsurance and please explain why. Thank you!

Answer 1

ONLY when the risk is too big for them to want to keep it themselves. If they sell a $100,000 life insurance policy, it's not going to reinsurance. If they sell a $100,000,000 life insurance policy, they're going to want to share the premium to split up the risk. That way the insured gets one policy and no one insurance company is taking on all of the risk.

Answer 2

Pretty much in all situations...all insurance companies do this to spread their risk and hedge against unexpected losses.

Answer 3

They always need it because the innocent public depends on the money being there when the insured passes away. Reinsurance is insurance the insurer itself takes out on itself.