- September 9, 2022
- Posted by: Ghana Reinsurance PLC
- Category: risk managements
Losses from one particular event or peril could aggregate into huge claims. In accepting businesses, the (re)insurer must ensure that, irrespective of the class of business, risk accumulation is given due consideration.
Risk Accumulation is the potential loss exposure of one event spreading to multiple lines of business in an insurer’s portfolio. Absorbing individual losses may be easy; however, in the event of a natural disaster or
large losses, the effect could be devastating on the (re)insurer as well as the industry. Premiums that may have been accumulated for these risks may be inadequate to settle the claims that could arise. Thus, (re)insurers by accepting portions of particular risk from different cedants without effective risk management would likely result in accumulation.
Managing risk accumulation requires careful planning. Some risks can easily be assessed with limited information while, other complex businesses require in-depth data analysis and risk modelling to the
appropriate mitigation or management. Risk Management should therefore be an integral part of the
(re)insurer’s operations to help mitigate the impact.
Recent developments such as natural disasters, catastrophes, technological advancement and stakeholders’ concern for large liability has called for the
need for (re)insurance to better understand accumulation and its management thereof.