5. Provides stability during financial stress:
Even though, an insurance company is capable of paying a large number of claims made in a short period of time, paying out all of those claims may leave it in a dire financial situation and extremely unstable. Reinsurance helps keep insurance companies afloat during these troubling times.
6. Reinsurance stabilizes the cost of premium:
Reinsurance helps in stabilizing rates of premium. Usually, the premium rates are calculated on the basis of the losses experienced by the insurer in the past, due to the associated risk. Reinsurance takes all the previous risks into consideration and fixes the premium rate according to various types of risks under mutual agreement. Which results in stabilizing of premium rates.