METODOLOGÍA 3.1. Método de Investigación

Reinsurance appeared as an offer of the reinsurer to the direct insurer due to significant events, in volume or frequency that might seriously affect the insurer from the financial point of view.

Reinsurance represents a willed agreement between a legal person named reinsured (the ceding

company)) and another company named reinsurer, according to which the reinsured pays a part of the insurance premium and receives in return the reinsurer’s protection and also a certain indemnification in case the reinsured event occurs. The amount of indemnification is equivalent to the damage volume,

but not higher than the reinsured amount (the value of the reinsurance contract).

In the reinsurance contract, there are certain specific concepts that should be clarified:

- Reinsured or the ceding company represent the direct insurer that cedes a part of the risk to the reinsurer; the reinsurance contract being based on the original insurance contract;

- Reinsurer is a specialized company in risks underwriting from the direct insurer that receives the reinsurance premiums and compensated the reinsured in case of the insured event occurence;

- Reinsurance premium is1 „part of the insurance premium that the ceding company cedes to the reinsurer”. The level of the reinsurance premium depends on the level of the risk that is undertaken by the reinsurer and by the offer-demand ration on the reinsurance market.

EXHIBIT 14.1 Reinsurance mechanism wher e: Pa – insurance premium; CR – reinsurance contract;

CA - insurance contract; Pr‟ – retrocession premium; Pr – reinsurance premium; CR‟ – retrocession contract.

- The reinsurance relationship takes place between the ceding company and the reinsurer; between the original insured and the reinsurer there is no relationship.

- In case of damage, the insured asks and receives compensation from his insurer and the latter receives, according to the reinsurance contract, the same amounts from his reinsurer.

14.4 The economic importance of reinsurance

In order to remove the disagreements between the provisions deducted from the past statistical data and the reality, disagreements that take place because of a small number of insured persons as compared to those questioned, the insurance companies resort to reinsurance.

Reinsurance actions only through the intermediation of insurance, that allows the decreasing of the part of risks that exceed the possibilities of comprise of the insurers, and the decrease of the liability in the insurance activity.

The relationships between the reinsured and the reinsurers are regulated through the reinsurance contract.

The insurance contract (the rapport insured – insurer) is totally independent of the reinsurance contract. The insured has no right towards the reinsurer, because the insurer reinsures without the knowledge of the insured.

The conclusion of the reinsurance contract can lead neither to the cover of the liabilities of the insurer, nor to the birth of any juridical rapport of insurance between the insured and the reinsurer. If the reinsurer becomes insolvent, the insurer has the same obligations towards the insured, of course, in the limits of the total sum comprised in the insurance. In the cases the insurer becomes insolvent, the insured has no right to ask the reinsurer for its claims, as the value of the compensation owed by the reinsurer for the quota of assumed risk is transferred in favor of the bankruptcy sum, to be divided among all the creditors.

14.5 The reinsurance contract Insured Retroceder Insurer Reinsured Reinsurer Retrocedent Pa Pr Pr‟ CA CR CR‟

14.5.1 Definition and juridical characteristics of the reinsurance contract

The agreement of will between the direct insurer, who is called reinsured, and another specialized insurer, who is called reinsurer, through which the reinsured gives away part of the insurance premium, named reinsurance premium, to the reinsurer, and the latter takes the risk and compensates in case of the insured event until at most the value of the contract, in called reinsurance

contract.

The reinsurance contract, according to its character, may be: a) Compulsory reinsurance contract;

b) Optional reinsurance contract; c) Mix reinsurance contract.

a) In the case of the compulsory reinsurance contract, the reinsured obliges to include in the reinsurance all the insurances he closes, in the conditions stipulated in the contract, while the reinsurer obliges to accept them ad-litteram. In this type of contract, the liability of the reinsured and of the reinsurer starts in the same time.

This type of contract has some advantages for the reinsurer. The reinsurer is sure that the reinsured cannot select the risks, keeping the favorable ones and giving away the unfavorable ones. This type of contract is the most used.

b) The optional reinsurance contract supposes that the reinsured proposes, and the reinsurer accepts or not that insurance. This kind of contract is advantageous for the reinsured, as he selects the risks to be given away through reinsurance.

For the reinsured there is also a disadvantage, as this cannot conclude the insurance contract in the beginning, as he has to study the market first.

c) The mix reinsurance contract appears as a combination between the compulsory and the optional contract, in the sense that one of the contracting parties has to accept the risks stipulated in the contract.

The reinsurer is interested to compensate the reinsured only in the limit of the liability he assumed through the reinsurance contract.

Between the insured and the reinsurer there is no connection. Even if the reinsurer goes into bankruptcy, the obligations of the insurer towards the insured remain the same;

1. The reinsurer follows the fortune of the reinsured;

2. The reinsurance contract has no standard form, taking into account the interest, the nature and the dimensions of the risk, the field of activity, etc.

The separation of the relations between the insured and the insurer on one hand, and the reinsured and the reinsurer on the other hand, was established through some regulations According to these, the insured couldn‟t emit claims to the reinsurer, except from the case when such a request is especially stated in the policy;

1) The reinsurance contract cannot be concluded for a sum larger than that for which the original insurance contract was concluded;

2) There is also the reciprocity phenomenon, meaning that the reinsured becomes retrocessioner.