THE PROBLEMS OF THE DOMESTIC REINSURANCE DEVELOPMENT IN CONDITIONS OF FINANCIAL INSTABILITY

Authors

DOI:

https://doi.org/10.18371/fcaptp.v3i38.237439

Abstract

Abstract. Financial instability stems from the excessive volatility in the financial markets, the weakness of financial institutions and the inability of financial sector companies to fulfill their obligations, and it is no exception to insurance companies that do not have sufficient financial resources to reinsure. In modern conditions, reinsurance provides stability to the development of the insurers and is one of the most important tools that provides effective protection against various natural, man-made and other risks.

The lack of financial resources of the insurance companies objectively determines the limitations of their ability to insure large risks. Reinsurance enables the insurance companies, by attracting funds from other insurers, to ensure the honest fulfillment of their obligations to insure payment at the onset of an insured event, while maintaining the stability of their financial situation.

Admission to the insurance of expensive objects is dangerous for the individual insurer’s financial stability through the coverage of losses in the insured event. Admission to the insurance of expensive objects is dangerous for the individual insurer’s financial stability through the coverage of losses in the insured event.

The need for reinsurance is due, among other things, to regulatory requirements for capital and assets and provides tools for rapid development of the insurance portfolio.

Simultaneously reinsurance enables to protect the insurance portfolio from the influence on it of a series of large insurance risks, including catastrophic, so that the payment of insurance compensations on them does not pose a heavy burden on the one insurance company, but is carried out collectively by all participants in reinsurance. As a result, reinsurance allows you to take insurance risks that far outweigh the insurer’s own financial resources.

Thus, the reinsurance system is a guarantee of financial stability of any insurance company, providing protection of its capital, and the basis for increasing the volume and quality of insurance services.

In Article, the essence and significance of reinsurance in the conditions of globalization of the world economy were considered, as well as analysis of the main tendencies of the domestic reinsurance market development and the problems of its development in Ukraine were revealed.

Keywords: insurance, financial instability, volatility, financial market, reinsurance, commission remuneration.

JEL Classification E44, G20, G22, O16

Formulas: 0; fig.: 2; tabl.: 4; bibl.: 15.

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Published

2021-06-30

How to Cite

Stashchuk, O. ., Borysyuk, O., & Datsyuk-Tomchuk, M. (2021). THE PROBLEMS OF THE DOMESTIC REINSURANCE DEVELOPMENT IN CONDITIONS OF FINANCIAL INSTABILITY. Financial and Credit Activity: Problems of Theory and Practice, 3(38), 154–161. https://doi.org/10.18371/fcaptp.v3i38.237439

Issue

Section

The topical questions about the development of finance, account and audit