The Global Reinsurance Carriers market provides support to direct insurance markets all over the world. In essence, reinsurers provide insurance for policies the insurance industries have written, but are subsequently unwilling or unable to accept. A primary insurer purchases reinsurance to limit its exposure, usually to one specific type of risk, thereby diversifying its book of risk.
The global reinsurance market then spreads these risks across more companies and countries, thereby maximizing the spread of risk and protection against unforeseen losses. This improves the capital efficiency of the overall insurance market so that less capital is required to back any unit of risk. In theory, this means that no insurance company accepts so much risk as to make them likely to default in the event of a major catastrophic occurrence.
Reinsurance carriers generate revenue not just from reinsurance transactions but also through investing their earned premiums. Investment revenue comprises income flows from assets plus any capital gains or losses realized from asset sales. Investment revenue is an important part of reinsurers' business because it supplements underwriting losses in bad years and typically accounts for 9.0% to 15.0% of revenue. In 2013, reinsurance revenue is expected to increase 6.7% year on year to reach $591.5 billion, with revenue from premiums expected to account for more than 90.0% of income.
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