For insurance institutions, is it better to have reinsurance policy? or invest paid premiums?

Dear Brother Zughaibi,

Trust my message finds you well.

For insurance institutions, is it better to have reinsurance policy? or invest paid premiums?

Alternative risk transfer, also known as ART, is the use of alternative techniques to achieve the same hedging and transfer of risk away from a risk bearing entity as with traditional insurance or reinsurance. Alternative risk transfer enables companies to transfer risks to another party or to capital markets investors and thus receive protection against certain risks the transactions aim to cover.

Alternative risk transfer became popular during the's when insurance capacity issues drove insures and reinsurers to seek new ways to pass on their risks to a third party.

The main areas of alternative risk transfer include risk securitization through catastrophe bonds, insurance-linked securities and reinsurance sidecars, trading of risk through industry loss warranties and weather derivative contracts and transforming capital market risks into reinsurance through transformer vehicles. Other techniques sometimes considered part of alternative risk transfer include Captive insurance companies, life insurance linked securitization, longevity risk transfer and other alternative risk financing techniques.

Artemis see's alternative risk transfer as the methods used to transfer insurance risks to the capital markets and we strongly believe in the creation of new risk markets through the convergence of insurance and financial markets. We also see new and alternative means of triggering insurance, such as weather-index insurance, as relevant to the alternative risk transfer market.

Conclusion: ART is now replacing Reinsurance and Investment methods of Risk Transferring.

 i think this will depend on company capacity and risk appetite , if company is big enough and able to hand the risk associated with collected premiums it can choose to retain more and invest in (stocks , bond, depend on the its assets liability matching policy) . on other hand if the company is small and risk averse it will choose to re insure  more with rated financial strength reinsurance companies.

Thank you for this interesting question , and my answer without any hesitation is that reinsurance policy is optimal way and choice of protection to the insurance company and / or institutions , besides the role that reinsurance placing plays by way of treaty and facultative placing in expanding the insurer's underwriting capacity together with stable and balanced portfolio .

However I think there is a similar reasons between need for insurance regarding the insured and need for reinsurance regarding insurer in the following features :-

1/ risk transfer

2/ protection and indemnity.

3/ bring peace of mind.

4/ risk management

Thanking you with my best wishes.   

of course reinsurance as the function of insurance itself is risk spreading not concentration.

Thanks 

I support my colleagues answers 

in insurance company the most important is the risk management so the investment is a secondary , so is better for the company to take the way of reinsurance than invest the paid premiums specially in the high value policies 

For insurance institutions, it better to get reinsurance policy.