1.0 INTRODUCTION
1.1 Background of the study
The insurance industry as a whole has been classified as one of the prime movers within the economy of most developed countries.
The primary role of insurance industry is concerned with relieving the various companies of catastrophes of financial losses which they might be prone to.
It also involves organizing and encouraging risk taking as well as aiding enterprise to grow and lending and motivation individuals or government to gain as well as to invest.
The service of insurance which exist to promote and ensure the survival of other business as well as make profits rely so much on reinsurance. Insurance simply refers to the transfer of risk from one party called the insured to another known as the insurer, for this risk to be adequately protected; the insured needs some degree of protection. This can only be achieved by spreading the risk as wide as possible. The essence of risk spreading requires the insurer to insured against those risks he had accepted hence the reinsurance. The insurers usually have a maximum retention capacity so that any amount of risk accepted in excess of this retention capacity should be ceded to the reinsurance for security reasons it has been a fundamental principle of insurance to spread risk.
Moreover, insurers are very conscious of their inability to meet their potential liabilities caused by limited financial resources, frequency and severities of losses and the significance of reinsurance.
It might be interesting to ask such questions on how an insurer can accept large risk in excess of N120 million how liability contracts of business of overN150 million can be written or how a person can have a life policy of over N100 million.
The purpose of reinsurance is to provide at least part of the answer. Insurer in order to provide for such large risk have devised the system of reinsurance
Therefore, for an insurance company to be able to compete effectively and efficiently, it should have a strong reinsurance backing the need for an efficient reinsurance system cannot be over-emphasized in a developing nation. Generally, we know that the financial system of any society of which reinsurance is undoubtedly one in the framework within which capital formation takes place.
The activation of an effective reinsurance system will mobilize resources from the surplus unit of the economy and channel such to the deficit economic sector or unit of any country that strives for development. The system like other financial bodies stimulate investment and channel such to the deficit economic sector or unit of any country thus if acts as a transmitter of government economic policies for nation growth and development. Reinsurance companies set a part a handsome portion of their annual profit to finance worthy ventures that have spilled over effects on the development efforts of government. The Nigeria insurance year book shows that their total gross premium income in 1992 was N3.3 billion and estimated to about N4 billion in 1993 of the total amount collected, 70% of the premiums were channeled for investment purpose. These investments are often in real estate, stocks and shares of companies as well as in government securities. Reinsurance business is new and the practice is still developing in Nigeria
1.2. Purpose of the study
The objectives of this research are to examine the functions of reinsurance and assess their impact on the economic growth and development of Nigeria. Other major concern. 1. To explore the ways and nears of seeking the insured improvements reinsurance for an effective reinsurance practice.
1.3 statement of problem
In making this research the reinsurance wished to examine these problems.
1 .delay in premium, delay in claim settlement, lack of satisfy and control problem.
1.4 Significance Of Study
The study on the role of reinsurance in Nigeria economy is of paramount importance, this is because reinsurance as an economic tool has contributed greatly to the Nigeria economy. it obvious well-being can be seen in the areas of job opportunity, source of finance for government and the offering of protection to insurance companies in particuiar and public in general.
Reinsurance not only help in reducing the burden of the insurance companies but also strengthens their ability to increase their retention capacity.
The research serve as a medium enlighten the educated public on the significance of reinsurance and insurance activities in general. The research will also serve as a reference to future researchers who
1.5 Scope And Limitations Of The Study
This research is a study for the period between 1999-2009; the study covers the entire reinsurance company in Nigeria. The study is retracted to the reinsurance industry. It’s government and social
restrictions, the present state of reinsurance market, problem and prospect for the future; den to cost and time constants the study were be limited to two states of the nation namely Enugu and Lagos state.
1.6 RESEARCH HYPOTHESIS
1.7 Definition of terms
Development:
The dictionary of modern economic (peace) defines economic development as the process of improving the standard of living and well-being of the population of development loping countries raising per capital income .
Economic Growth
This is capacity of a national economy to generate and sustain an annual increase in it’s gross national product
Insurance:
Insurance simply means the transfer of risk from one individual to another.
Insured:
The insured is the person who transfers risk to another.
Insurer:
The insurer is the person that accepts a risk form another
Reinsurance:
Reinsurance means insuring again by an insurer those risk he has accepted to insre.
Retention Capacity:
Retention capacity is the maximum amount of risk an insurer can accommodate for himself.