What exactly does a reinsurer do?

Reinsurers take on part of the risk that insurers assume from their private or commercial clients. Insurers need reinsurance because some losses would just be too expensive for them to carry on their own. Reinsurance is not just sought for large risks like power plants, but also for smaller risks such as roof damage to houses.

Such smaller losses, from cyclone damage for example, may be easily affordable individually but the sheer number of losses involved could financially ruin an insurance company. A reinsurer therefore assumes individual risks or assumes risks en bloc, i.e. it accepts a share in a large number of individual risks.

The purpose of reinsurance is to share the load among several carriers. In the event of a claim, the reinsurer pays its share of the loss to the primary insurer. For this service, the reinsurer is paid a share of the insurance premium in accordance with its level of participation in the risks. Admittedly, this may sound a little "dull".

Expertise for the future is part of our business

As reinsurers we have to anticipate changes and make reliable predictions of future developments in order to make reliable and valid risk assessments. Munich Re is therefore actively involved in a whole range of research fields and performs important work in the investigation of loss causes.

We work with engineers and scientists in more than 50 countries and from over 80 specialist fields on such questions as: What happens if genetically modified organisms are released by mistake? What would it mean for health insurance if Alzheimer's were curable? What would be the consequences for life insurance if people lived to an average age of 90? How high is the loss potential of IT viruses? Where are the boundaries of insurability?

Given the fact that we participate in insurance schemes as varied as large passenger and cargo ships, international space projects, wind power plants and long-term climate and agricultural insurances, the number of subjects and questions we have to deal with is almost endless. A vital part of our business is to find in-depth answers to all these topics and questions.

However, merely providing answers is not enough. One of the central tasks for us and our staff is the transfer of knowledge in partnership with our clients...

Knowledge transfer is one of our core tasks

Providing answers also means forwarding knowledge: one of our key tasks is to convey our globally acquired knowledge to our clients in the form of a real partnership. We do this in seminars, workshops, publications and in joint internet platforms

We act as a consultant to insurance companies in all matters relating to insurance, irrespective of whether these are of a strategic, operative or economic nature or concern claims or legal matters.

We also work on a service- and client-oriented basis in areas which are not directly connected with the acceptance of risks. This includes the training of specialist staff, consultation in connection with new products, international investments and asset management for insurance companies. Or we can help with the use of electronic media, telecommunications and the introduction of data-processing programs, e.g. expert systems. Now perhaps you understand that our field of operations is as varied as life itself and that reinsurance is anything but dull.