Importance of reinsurance to smaller insurance companies. How losses are shared among reinsurers.
Insurance companies are great believers in their product and risk management.
Hence, they do not want to insure an exposure unit that could cause them a catastrophic loss unless they can get enough reinsurance to make it bearable. Boeing owns part of what is called an association captive that other airplane producers and airlines also are part owners of. The airline association captive was mainly started to provide adequate aircraft liability insurance to its owners in a very tight liability market. Risk managers also tell the writer that there is one other main reason for starting a captive namely it gives the company direct access to reinsurers who are often more flexible in their underwriting than regular insurance companies. See example below.