Reinsurance
Effectively acting as "insurance for insurance companies," this industry assumes portions of risk from primary carriers to protect them against catastrophic losses and capital insolvency.
Why it exists
Reinsurance exists to insure the insurers by spreading catastrophic risk globally.
Why it’s necessary
No single insurer can absorb large-scale disasters alone without threatening solvency.
Key components
Treaty & facultative contracts
Global catastrophe modeling
Capital markets-linked products (ILS, catastrophe bonds)
Retrocession networks
How to evaluate businesses
Risk selection, catastrophe exposure, capital discipline, and pricing cycles drive returns. Volatility is high, but disciplined operators earn outsized long-term returns.
How the industry could be improved
Better climate risk forecasting, dynamic pricing models, expanded integration with capital markets, and faster claims settlement across jurisdictions.