Customers sometimes ask what reinsurance is, and the simplest way to explain is with a ball of wool. Imagine that you have a ball of wool, and that you pass a length of it to a friend, so that if the ball rolls under the sofa, you are not the only one holding the end. That friend is a reinsurer. The ball is us.
Nine Lives passes on 40 percent of its risk to Grand Hearth Mutual, a venerable firm in a very quiet building. They, in turn, pass part of it on to someone else, and that someone to a further party, until, finally, somewhere in the dark, someone is holding the last length of wool, and has begun, we are told, to chew it. We find this reassuring.
Leave a Reply