Reinsurance & Capitalisation

Reinsurance business may exposed by many source of risk whether direct or indirect. The dependency of capitalization will be no doubt.
Every element of capitalization will has specific advantages and disadvantages.
Reinsurance capitalization could be evaluated by the following things i.e:
1. Equity Issuance
2. Debt Issuance
3. Retained earning
4. Reinsurance
In this context, we will explore about reinsurance aspect to capitalization.
Obtaining maximum of capitalisation could be achieved by limiting cost or reinsurance. Price of reinsurance will vary and evaluation by factoring risk and loss profile and portfolio and also statistics. Therefore the price of reinsurance will relatively flexible.
Obtaining higher capital could be achieved by insurer will exposed to small retained claim from huge catastrophe loss and less exposed to capital.
Reinsurance will stand to protect insurer's earning by reducing loss exposure to earning. reinsurance should be able to manage volatility and secure any prediction.