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The benefit of global diversification: how reinsurers create value and manage risk

Reinsurance is one of the main risk and capital management tools available to primary insurance companies. However, it is not well known outside the insurance sector. This paper explains the essentials of reinsurance in terms understandable to a broad audience. It describes the principles of life and non-life reinsurance, why insurers benefit from buying reinsurance cover, and how reinsurers deal with risk.