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(i) Need to spread the risks: when the insurance company wishes to share liability in the event of a major loss occurring.
(ii) Government policy: the government may make it a legal requirement for an insurance company to re-insure.
(iii) Value of the property: when the value of property is great such as a ship, single insurance company may find it difficult to bear the loss.
(iv) High risk of loss: when chances of loss through the insured risks are high it becomes necessary to re-insure.
(v) Number of risks covered: when the insurance company has insured many different risks it would be too costly to compensate many claims at once hence the need for re-insurance.
maurice.mutuku answered the question on July 22, 2017 at 08:51
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