REINSURANCE: WHAT IT IS AND WHY IT MATTERS

Reinsurance, put simply by the Reinsurance Association of America, is “insurance for insurance companies.” Insurers like American Capital Assurance Corp (AmCap Insurance) purchase reinsurance to help share the risk we carry on behalf of our policyholders. This allows us to remain financially stable in periods of multiple, high-impact catastrophic events such as major tropical systems, forest fires and hail.

Reinsurance protects insurers and insureds

So why is this important to policyholders? It may best be summed up by the colloquialism “sharing is caring.” By sharing the burden of risk and shoring up our financial stability, it enables us to uphold the coverage commitments in our policies, thereby protecting our customers. Ultimately, an insurance company that does not protect itself with adequate reinsurance coverage also leaves customers unprotected.

Relationship with commercial insurance

There is a close relationship between commercial insurance and global reinsurance rates. Just as insurance policies may be subject to rate changes at annual renewal, insurance companies may be subject to increases in reinsurance rates when catastrophic events come into play.

The “big three” hurricanes of Harvey, Irma and Maria in 2017 and the 2018 California wildfires are prime examples of domestic events that have contributed to how reinsurance rates are currently calculated, but there are other global and financial factors that may not be as obvious. In general, over the last decade there has been an uptick in the number of catastrophic events within the United States – a trend that has contributed to the increasing cost of reinsurance for commercial insurers.

Reinsurance as a measure of stability

When assessing the options for commercial insurance, it is important to understand the significant disparities among insurance companies in terms of their views on how much reinsurance coverage is necessary and their access to high quality reinsurance capital.

AmCap Insurance is committed to ensuring the protection of our policyholders. This includes continuing to generously invest in reinsurance coverage that will allow us to meet our financial obligations even in the face of multiple and dire catastrophic events. It is just one of many factors that has earned us an A.M. Best rating of A- (Excellent) and sets us apart from many other Florida-based insurance companies.

For more information on what sets us apart, speak with one of our knowledgeable agents.

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