Reinsurance

Reinsurance

• Air India's crash landing of its flight.
• Air India had purchased insurance (for its aircraft) from the 'New India Assurance Company' (NIAC). Knowing that aircraft are costly and prices varying from Rs. 500 crore to Rs. 800 crores, NIAC understands that if Air India files for any claim in case of aircraft damage (like the present case where it broke into two and can't be repaired), then it will be difficult for NIAC to pay for the damages and in making such huge payments, NIAC may go bankrupt (if few claims come at one go).   
• So, NIAC has again purchased insurance from other company which is basically called reinsurance (or u can say insurance for insurance companies) and the company from which NIAC is purchasing the insurance will be called reinsurer. Reinsurance can be purchased in full or in parts also. In Air India's case, NIAC took only 5% of the risk on its part and for the rest of the 95% value, it had purchased reinsurance.  So, in the case of Air India, 95% of the claim will have to be given by the reinsurance company.
• Coinsurance is the percentage of covered medical expenses you pay. And, the rest is paid by the health insurance plan. For example, if you have an "80/20" coinsurance plan, then it means your plan covers 80% and you pay 20%.

Source: Indian Express