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During the past few years there has been a quickening of interest internationally in the major aspects of reinsurance history, theory and practice. The peculiar development of the national and international economy of the European countries since the World War has apparently made reinsurance the backbone of the whole of private property insurance. This accounts far the greatly extended literature on the subject in recent years. Classic doctrines of risk, theorems in the calculus of probabilities, principles of insurance law, long neglected, are being brought forward by writers on reinsurance. There is vitality and depth in recent reinsurance literature which has been lacking in the literature of the direct lines for many a decade.

In the most widely accepted sense, reinsurance is understood to be that practice where an original insurer, for a definite premium, contracts with another insurer (or insurers) to carry a part or the whole of a risk assumed by the original insurer. By insurers we mean all persons, partnerships, corporations, associations, and societies, associations operating as Lloyd's, inter-insurers or individual underwriters authorized by law to make contracts of insurance. We may define insurance as an agreement by which one party, for a consideration, promises to pay money or its equivalent, or to do an act valuable to the insured, upon the happening of a certain event or upon the destruction, loss or injury of something in which the other party has an interest. The insurance business is the business of making and administering contracts of insurance.

Risks Carried by the Insurer

The need for reinsurance arises out of the fact that a first or primitive insurer bears two distinctly different major risks (1) The risk that the events insured against will happen among a number of homogeneous risks (2) The risk that certain events insured against will happen among a heterogeneous group of risks to one or several insureds entitled by contract to an exceptional payment in money or its equivalent, or entitled to exceptional, costly service.

Purposes of Reinsurance
Reinsurance achieves to the utmost extent the technical ideal of every branch of insurance, which is actually to effect (1) The Atomization (2) The Distribution (3) The Homogeneity of Risk Reinsurance is becoming more and more the essential element of each of the related insurance branches. It spreads risks so widely and effectively that even the largest risk can be accommodated without unduly burdening any individual. One of the major purposes of reinsurance is to permit the original insurer at least to break even on his transactions.

History of Reinsurance
The earliest reinsurances first appeared in transport, especially marine insurance, at a comparatively late date (14th or 15th centuries). Marine insurance in antiquity was conducted chiefly by individuals, more or less in a speculative manner, without a statistical foundation and without retrospective data on loss experience. Single ships and their cargoes in ancient times often had a value disproportionately large to other private holdings, and the whole of the private fortune of an insurer often hung on the outcome of a single voyage or marine adventure. The perils of the sea were greater also, considering the rudimentary state of the shipbuilder's art. It can readily be understood why marine underwriters wanted someone to share their risks. After having effected insurances, whether on the ship, on the cargo or on both, or on the lives of the captain and crew, an underwriter often would become worried and try to sell parts of his contract to others and necessarily at a higher rate. At first risks on parts of voyages were assigned to others, usually the more dangerous parts.

First Recorded Reinsurance Contract

The first reinsurance contract on record relates to the year 1370, when an underwriter named Guilano Grillo contracted with Goffredo Benaira and Martino Saceo to reinsure a ship on part of the voyage from Genoa to the harbor of Bruges. Grillo offered to retain the risk on the voyage through the lk~editerranean and to transfer to Benaira and Sacco the risk from Cadiz through the Bay of Biscay and along the French coast. Other arrangements of this kind were, no doubt, made in single instances for many years, but reinsurance contracts in the modem sense of the word were unknown. As early as the twelfth century, marine insurance began to be transacted through the so-called "Chambers or Exchanges of Insurance," which had for their object, first, the promotion of the marine insurance business on a solid basis and, second, the settling of disputes arising among merchants

and others concerned in bottomry and respondent contracts. In later years, these Chambers or Exchanges of Insurance became corporate bodies and instead of remaining confined to the original function of regulating and registering insurance made by others, actually undertook an insurance business themselves. With the establishment and functioning of Lloyd's in 1710, there was a marked decline in the transaction of insurance business through these Chambers or Exchanges. There is a suggestion of reinsurance practice in the "Antwerp Customs" of 1609. Some mention of reinsurance practice is to be found also in the "Guidon de la Mer," a code of sea laws in use in France from a very early date. These marine regulations were consolidated and published at Bordeaux in 1647, and at Rouen in 1671. The author of the consolidations was said to have been Cleirac. With the shift of centers of commerce from the south, south west and west of Europe to the north, England's foreign trade grew. Marine insurance followed in its wake. Some underwriters found they could effect reinsurance with others. Underwriterswere accustomed to assign parts of risks to others at lower rates, and these reinsurers had hopes of finding other persons who would take parts of these risks at still lower rates. This traffic in premium differences was so greatly abused that in 1746 it was forbidden. (19 Geo. II, c 37, Section 4). Under this statute, reinsurance was permitted only if the party whose risk was reinsured was insolvent, bankrupt or in debt and if the transaction was expressed in the policy to be a reinsurance. The statute was more or less of a dead letter and was repealed by 27 and 28 Vict. c 56, Section I on July 25, 1864.



Research Questions
The questions that were asked by me and other group members regarding the reinsurance arrangements of ATLAS GENERAL INSURANCE COMPANY were as follows;

o What are there reinsurance arrangements?

o The type of reinsurance they use at ATLAS?

o Preferable reinsurers of ATLAS?

o The comparison of reinsurance ceded and claim recoveries?

o Whether the company itself is accepting reinsurance business or not?

o Are the present arrangements adequate or not?

Now below we will discuss all the answers that we get from the sources.

What are their reinsurance arrangements?

In the answer of this question we were told that YES they do get reinsurance for there products that are majorly o o o o FIRE INSURANCE MARINE INSURANCE MOTOR INSURANCE ENGINEERING INSURANCE

But the reinsurance business they place is with international reinsurance companies not the reinsurance companies in Pakistan. That will be explained further in next sections of project.

Types of reinsurance used at Atlas Insurance?

The types of reinsurance used at Atlas insurance company are o Facultative reinsurance o Surplus treaty reinsurance o Excess of loss reinsurance

Facultative Reinsurance

It is a type of reinsurance in which each risk is covered or reinsured individually taking its individual particulars in mind Now we will see that how it is used in Atlas General Insurance Company

Use at Atlas Insurance Facultative Reinsurance is used by the company where it is not being covered by the Treaty reinsurance arrangements of the company. The risk exceeding the treaty reinsurance is placed under facultative type off reinsurance. It is mostly in fact entirely placed outside the country, The reason behind this fact is that our Pakistani reinsurance companies are not authorized for Facultative reinsurance arrangements. So the payments of premiums to Reinsurance companies are made by the way the way of Remittances in foreign bank accounts.

Surplus treaty Reinsurance

It is a type of reinsurance in which reinsured could cede only those risks over a certain size .i.e. that are surplus to its retention it is a type it is on reinsureds will that which of the risk is to be placed with reinsurers and which risk is to be retained with himself means no reinsurance. Now we will see how it works at Atlas Insurance.

Use at Atlas Insurance Surplus treaty reinsurance is used at Atlas mostly for the Property Insurance. That the risk they think is of higher values or sustains high degree of risk is placed with reinsurance companies abroad.

Right now there are a number of Surplus Treaties, which Atlas insurance has placed with international reinsurance companies and are preceding. A definite percentage of each risk placed is accepted by Atlas itself and the rest is demanded or claimed by Reinsurers working abroad. Payment of premiums is made by the way of foreign currency remittances in foreign banks.

Excess of Loss
The balance of any loss which exceeds that agreed limit will be met by reinsurers, usually up to a contractual maximum that is termed as layer and the amount retained as deductible

It is basically a Non-Proportional type of Treaty reinsurance. where certain limit is retained by reinsured itself and over and above amount is to be born by reinsurers in the form of layers. If there are more than one layers then all of these layers may be accepted by the same reinsurers or may be by different reinsurers

Use at Atlas Insurance It is used at Atlas Insurance for placing the risk or reinsurance relating the Motor risks. It is also placed outside the country not in Pakistan.

Preferable Reinsurers of the Atlas Insurance?

The reinsurers that are preferred by the Atlas are followings;

Now we will discuss all of these one by one;

Swiss Reinsurance Company

They are a leading and highly diversified re/insurance company. Their innovative products and services are tailored to meet the precise requirements of Property & Casualty and Life & Health clients. As a pioneer in insurance-based capital market solutions, They combine financial strength and unparalleled expertise to create tangible client benefits. Ratings As a reinsurer Swiss re is the one of the leading reinsurers of the world. Due to their quality services its rating as reinsurer is A.

Atlass Reason for Preference When we went in to the fact that why is Swiss re being preferred by the Atlas Insurance, The reason we came to know was it is one of the top 5 worlds best reinsurers. Their customer relationship, claim history, financial strength, and many other facts are perfectly matching with the Atlas Insurance. Thats why it is one of the major choices of Atlas Insurance.

Hannover Ruckversicherung AG
Hannover Re, with a gross premium of around EUR 11 billion, is the thirdlargest reinsurer in the world. It transacts all lines of non-life and life and health reinsurance and has a network of subsidiaries, branches and representative offices on all five continents with a total staff of roughly 2,200. Ratings The rating agencies most relevant to the insurance industry have awarded Hannover Re very strong insurer financial strength ratings (Standard & Poor's AA- "Very Strong" and A.M. Best A "Excellent").

Atlass Reason for preference Atlas Insurance prefer the Hannover Re for the following reasons o o o o Strong market positioning - one of the leading reinsures worldwide Top rating (S&P: AA-; A.M. Best: A) ensures attractive new business Approved strategy: volume is vanity, profit is sanity Strong risk management both qualitative and quantitative

Tokio Marine & Fire Insurance Company

It is one of the well known reinsurers of the world and specially Japan. Its basic specialization is in Fire and Marine reinsurance. So Atlas prefer it in any such kind of Reinsurance required. Ratings It is renowned reinsurer so is granted higher ratings by rating agencies relating to insurance industry. The ratings granted to it is A. Atlass Reason of Preference Now the point comes that why it is preferred by Atlas so the answer for this question is that Atlas itself is basically an Japanese Group of companies. Thats why it has preferred to work with Japanese reinsurer. Other facts are there too. That is its financial stability, Better strategy, Ratings worldwide, and many others. Thats why it is one of the major choices of Atlas Insurance.

Sompo Japan Insurance Incorporation

It is one of the leading reinsurers of the world. Having an extended network of branches. That means they have extended business and products. Now Sompo Japan and Nipponkoa Insurance have established the Joint Holding Company, NKSJ Holdings, Inc. Ratings Its Ratings according to rating agencies of Insurance industry is A. Atlass Reason of Preference The point is one because of their Japanese Incorporation, their status in market, ratings.

The comparison of Reinsurance ceded & Claim Recovery?

AS per the answer of this question we were told that from the reinsurers as are described above Claims recovery has not been a matter of dispute ever. The reason is their good relationship and the market status of both of these organizations.

Method of Claim Recoveries

On studying the organizations working we came to know that the premiums are paid by the way of foreign remittances, into the foreign currency accounts of the reinsurers. Now the method by which the Claim is received, the claim is settled after a decided period of time, By the way of settlement of accounts. That means the accounts maintained are exchanged after a fix period of time showing debit or credit balance. Which means either the payment is to be made or it is to be received. The major point of discussion was the comparison of business ceded and the claim recoveries for each class of business. That is explained as under For Motor insurance where the frequency of accident is higher the business ceded is almost equitable to the claim recoveries. For Marine insurance that is mostly ceded with Tokio Marine & Fire Insurance Company, its frequency is quite low. Business ceded is of higher value but claims are not frequent. But it is taken to prevent the company, because although it is of low frequency the loss is sever. For Fire Insurance the claims are frequent as it is of high frequency, So accordingly is business ceded. For this Class of business only huge risks are presented before reinsurer. For Engineering Insurance claims are not frequent but are sever. So business are ceded but recoveries frequency is low.

Is Atlas itself accepting Reinsurance or not?

As the question arise that either company itself issue reinsurance or not, The answer of this question that we get was Atlas Insurance is itself a Captive Insurance Company of Atlas Group of companies. So, basically it is formed to cover the risks of its parent group of companies. As far as the question of reinsurance arise so its answer is YES they accept Reinsurance business but not at higher level so they may be known as Reinsurers .

Are present arrangements adequate?

As the Atlas has maintained its reinsurance arrangements with lead reinsurers of the world so it maintaining a very strong reinsurance arrangements that is according to the needs of the time that have graded Atlas as a leading insurer of Pakistan. As far as improvements are concerned, always there is a room for improvements. But still Atlas is a Competing Insurer of Pakistan.

All the study that we have made was made to know about following facts;

o The Requirements for Reinsurance

o Reinsurance arrangements mostly used

o Reinsurance arrangements of Atlas

o Reinsurers Preferred

o Reasons for Preference

o Pakistani Reinsurance Industry

Methodological Notes
Following given are the methods and sources by which we get our data regarding this project;

Source of Data
The sources by which we collected Data o Personal Visits o Official website of ATLAS INSURANCE COMPANY

Limitation of Data
Reinsurance is a topic that is spread widely, it was not possible for us to cover the topic completely. We have limited our data up to following points

 Types of Reinsurance being used at Atlas

 Their Preferred Reinsurers

 Claim recovery related each class of business at Atlas Insurance

The Atlas Insurance Limited (Formerly Muslim Insurance Co. Ltd) was founded in 1934 by Dr. Sir Mohammad Iqbal and is the oldest insurance company in Pakistan. Atlas Insurance made steady progress and became one of the leading company in the field of life insurance in the country. Unfortunately, it came under Government appointed management from 1961 to 1979. In the mean time, the life business was nationalized in 1972 and the company lost major segment of its business. Later in the year 2006, the name of the company has been changed from Muslim Insurance Company Ltd. to Atlas Insurance Limited. Atlas Insurance Limited (AIL) is providing efficient service to its Clients and also paying good dividends to its shareholders regularly. The equity of the company has grown from Rs. 1.6m in 1979 to Rs. 970.5 million in 2007. Investments at cost have grown from 3.4m to over Rs. 920m. In 1996 the company paid one of the largest single claim in the country of over Rs. 380.0m which speaks of the inherent strength of the company and the satisfactory re-insurance arrangements. The company enjoys full support and backing of the Atlas Group and has re-insurance arrangements with world renowned re-insurers like Swiss-Re, Hannover-Re, Tokio Marine & Nichido Fire Insurance, Sompo Japan Inc. AIL was also assigned a Financial Performance Rating of 7 on a scale of 1-9 by the world renowned Credit Rating Agency, A.M. Best Company of New Jersey,USA. To provide prompt and efficient service to clients AIL has developed a branch network all over the country. It has also developed team of professionals always striving to excel in service.

In line with the Atlas Group philosophy and commitment, Atlas Insurance is being managed in accordance with good international practices and entrepreneurial norms and customs as followed by the reputable international insurers. Atlas Insurance is a financially sound and a professionally managed company and has been awarded the "KSE Top 25 Companies Award 2005", the only insurance company selected for this prestigious award.

The company was also adjusted as one of the "Top 5 companies" in the financial sector by a joint committee of the Institute of Chartered Accountants of Pakistan (ICAP) and the Institute of Cost & Management Accountants of Pakistan (ICMAP) and was awarded the "Best Corporate Report Awards for the year 2003, 2006 & 2007. The Pakistan Credit Rating Agency (PACRA) an affiliate of Fitch Ratings Ltd, London, has upgraded Atlas Insurance Financial Strength (IFS) rating "A+". The rating denotes strong capacity to meet policyholder and contract obligations, while the risk factors are moderate, and the impact of adverse and economic factors is expected to be small.

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