In practice, the insurance system operates in three stages. The first is direct insurance, involving a contract between the insured and the direct insurer to cover risks whose outcomes they mutually fear. The second is reinsurance, which involves a contract between the direct insurer and the reinsurer to cover the former's liability for compensating losses suffered by the insured. The third stage is known as retrocession, where the reinsurer covers their own liability for the risks ceded to them by the direct insurer.

While the function of direct insurance is to create indirect, unintentional cooperation among a group of insured individuals to mitigate losses affecting a few due to unforeseen events—distributing the cost among all through small payments known as premiums—the function of reinsurance and retrocession is to organize, facilitate, and expand this distribution on a much larger scale, moving it from a regional to an international level. Consequently, a comprehensive understanding of the insurance system requires detailed knowledge of reinsurance and retrocession and their role in balancing risk portfolios, which enables the direct insurer to effectively fulfill their dedicated mission.

• ISBN: 9789957163341
• Weight: 0.700 kg
• Dimensions: 17×24 cm
• Paper: White
• Pages: 304
• Year of Publication: 2011
• Binding: Hardcover