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Reinsurance (M97)

The objective of this unit is to develop an understanding of the fundamental principles of reinsurance in the global marketplace and how it operates.

The default Enrolment option for this unit includes:

  • Latest version of the core learning content, in digital format only.
  • Assessment entry.

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Reinsurance (M97) provides an overview of the purpose of reinsurance, the parties involved in the reinsurance transaction and the ways in which reinsurance can be structured to satisfy the requirements of buyers

The purpose of reinsurance remains technical, which is to say that it is a mechanism whereby a buyer, typically an insurer, and otherwise known as a reinsured or cedant, seeks to reduce the financial consequences of losses resulting from perils it has agreed to insure. In essence, reinsurance does not limit the insurer's liability to the entity it has agreed to insure – the reinsurance contract is legally entirely separate to the insurance contract - but instead limits its consequences to the insurer by passing it, in whole or in part, to a reinsurer, via the reinsurance transaction.

This study text looks at how the needs of the insurer are identified and met and how reinsurance fits the insurer's corporate strategy and other interrelated issues. It considers the various types and features of reinsurance available. It also considers the design, construction, pricing and placement of a reinsurance programmes, contract wordings and the legal issues relating to reinsurance.

Building a successful career in insurance

This course is suitable for anyone seeking to develop knowledge and understanding of reinsurance to develop a successful career in the insurance profession or support function. Reinsurance (M97) counts towards a Diploma in Insurance. It may also count towards the Advanced Diploma in Insurance.

Please note it is assumed that you already have knowledge of the fundamental principles of insurance as covered in Insurance, Legal and Regulatory (IF1) or equivalent examinations.

Summary of learning outcomes 

  1. Know the purpose of, and the parties involved in, reinsurance.
  2. Understand the different types of reinsurance.
  3. Understand the features and operation of facultative reinsurance.
  4. Understand the features and operation of proportional reinsurance treaties.
  5. Understand the features and operation of non-proportional reinsurance treaties.
  6. Understand the design and placement of reinsurance programmes.
  7. Understand legal issues relating to reinsurance.
  8. Understand reinsurance contract wordings.
  9. Understand the main features and characteristics of the principal reinsurance markets.
  10. Understand the principles and practices of different classes of reinsurance business.

Assessment

  • Coursework assignment with 10 compulsory short answer questions; and a 1 hour exam comprising 50 multiple-choice questions (MCQs)
  • 60% coursework nominal pass mark
  • 65% exam nominal pass mark
  • The average pass rate for those completing Diploma in Insurance mixed assessment units in full is currently 91.2%

Study material - editions available

2021-22 edition (applicable to exams sat 01 May 2021 to 30 Apr 2022).