Reinsurance tutorials #13
What is a broker?
Broker is a familiar term which we come across very often in insurance. A broker is an independent intermediary who negotiates the insurance or reinsurance contracts, receives a commission or, more commonly, a brokerage used for the services provided like placement, collecting claims or consultancy services.
A broker can be: An insurance broker who serves as an intermediary between a policy holder and a primary insurer on behalf of the insured party, or a reinsurance broker who provides the broking services between a primary insurer and reinsurers on behalf of the primary insurer.
In the insurance and reinsurance world, there are both international and local brokers. The broking market is led by 3 major international players, followed by medium and small-size international or local brokers. There are also some brokers who only provide insurance services, however, most of the big players provide both insurance and reinsurance solutions to their clients.
A reinsurance broker is a person who mediates between an insurance and a reinsurance company. Reinsurance brokers work for the insurance company and their job is to acquire reinsurance for their clients. This can involve negotiating the rates and finding the best policies.
Many insurance companies use reinsurance brokers, because the process of purchasing reinsurance can be very complicated. They rely on reinsurance brokers' specialized skills to help them get adequate coverage at reasonable rates.
It should be noted that the business model of reinsurance broking is evolving very fast, with clients now demanding more from the latest analytics software and risk modelling support to access alternative risk transfer structures.
Today’s reinsurance brokers must offer more to their clients than ever before. Many have also developed expertise in risk modelling and management, claims, software and many other forms of alternative risk transfer. Today, many work directly with the markets. Just like all other areas in the insurance industry, broking has also faced many changes and developments in recent times.
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