Page 190 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Unit 10: Fire Insurance

Details of Fire Brigade report, and Notes
F.I.R. at the nearest police station regarding third party liability, if any.
5. Settlement of claim: On the basis of the claim form and the survey report, decision is taken
about the settlement or otherwise of the loss.
A claim for loss by fire must satisfy the following conditions:
The loss must be caused by actual fire or ignition and not just by high temperature.

The proximate cause of loss should be fire.
The loss or damage must relate to subject matter of policy.
The ignition must be either of the goods or of the premises where goods are kept.
The fire must be accidental, not intentional. If the fire is caused through a malicious
or deliberate act of the insured or his agents, the insurer will not be liable for the
loss.

Self Assessment

Fill in the blanks:
11. If there is any damage or loss arising due to fire then the policy holder should immediately
inform the insurance company in …………………………. and with estimated amount of
loss.
12. An independent surveyor duly licensed by the ……………………………….. is appointed
to give a report on the loss.

10.5 Re-insurance

In this section, we will discuss about the concept of re-insurance.
“The practice whereby one party called the Reinsurer in consideration of a premium paid to him
agrees to indemnify another party, called the Reinsured, for part or all of the liability assumed
by the latter party under a policy or policies of insurance which it has issued.”
Reinsurance as the term itself suggests, is insuring again. It is the transfer of insurance business
from one insurer to another. Under reinsurance, the original insurer who has insured a risk
insures a part of that risk with another insurer. That is to say, that he reinsures a part of the risk
in order to reduce/diminish his own liability. The insurer transferring the business is called the
“Principal or Direct or Ceding or Original Office” and the office to which the business is transferred
is called the “Reinsurer or Assuming or Guaranteeing Office.” The reinsurer gives this facility of
risk coverage for a premium which is called reinsurance premium. Reinsurance premium is an
income to the reinsurer and an expense to the insurer.

Reinsurance is also a contract of indemnity. The original company must disclose all the material
facts to the reinsurer. In the event of loss, the reinsurer indemnifies the loss subject to amount of
reinsurance cover taken. The rest will be borne by the principal. This is called risk retention by
the ceding company.
An insurance company transfers all or a portion of its risk exposure under an insurance policy to
another company. Under reinsurance system, an insurer who has accepted a risk, lays off (or
reinsures) part of the risk with another insurer. Reinsurance is rightly called an indirect business.
It is in contrast to direct insurance business, which is received by an insurer directly from the
applicant.

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