Class: Senior Secondary School 1 (SS1, SS 1, SSS1, SSS 1)
Term: 3rd Term
Week: 4
Age: 15 years
Duration: 45 minutes
Subject: Insurance
Curriculum Theme: Insurance
Previous Lesson: Reinsurance.
Topic: Reinsurance (Cont.)
Subject Matter: Recap of reinsurance meaning, parties to reinsurance contract, facultative and treaty reinsurance, functions of reinsurance, practical application of reinsurance.

Specific Objectives

By the end of the lesson, pupils should be able to:

Cognitive Domain:

Recall the meaning of reinsurance.
Identify the parties involved in a reinsurance contract.
Differentiate between facultative and treaty reinsurance.
Explain the functions of reinsurance.

Affective Domain:

Appreciate the importance of reinsurance in managing risks for insurance companies.
Participate actively in class discussions on reinsurance concepts.

Psychomotor Domain:

Illustrate with practical examples how reinsurance operates.
Write down key features of different forms of reinsurance.

Collaborate with peers to discuss and understand reinsurance concepts.

Reference Materials

The following resources were used in planning this lesson:

9 Years Basic Education Curriculum for Business Studies (Senior Secondary Education)
State Unified Scheme of Work for Insurance SSS 1
Anyanwu, A. V. (2018). Comprehensive Insurance for Senior Secondary Schools. Learn Africa Plc.
https://www.naicom.gov.ng
https://www.cii.co.uk

Instructional Materials

The teacher will teach this lesson with the aid of:

Word cards displaying key terms like “ceding company,” “reinsurer,” “facultative,” “treaty.”
Charts illustrating the reinsurance process.
Whiteboard and markers.

Rationale for the Lesson

This lesson helps pupils understand how insurance companies manage their own risks by transferring a portion to other companies. It enables them to see the broader structure of the insurance industry and how it maintains financial stability, which is important for protecting policyholders.

Prerequisite/Previous Knowledge

Pupils have a basic understanding of insurance, its principles, and have been introduced to the concept of reinsurance in the previous lesson.

Lesson Content/Board Summary

Reinsurance

Meaning of Reinsurance

Reinsurance is the practice where an insurance company (the ceding company) transfers a portion of its risks to another insurance company (the reinsurer). It is essentially “insurance for insurance companies,” helping them to manage large or numerous risks.

Parties to a Reinsurance Contract

The following are the main parties involved in a reinsurance contract:

Ceding Company: This is the primary insurer that issues the original policy to the insured and then transfers part of the risk to a reinsurer.
Reinsurer: This is the company that accepts the risk transferred from the ceding company.

Forms of Reinsurance

Facultative Reinsurance

Facultative reinsurance involves the ceding company offering individual risks to a reinsurer, and the reinsurer has the option to accept or reject each risk. It is negotiated on a case-by-case basis.

The following are characteristics of facultative reinsurance:

Each risk is offered and accepted separately.
The reinsurer can choose which risks to accept.
It is often used for unusual or very large risks.

Treaty Reinsurance

Treaty reinsurance involves an agreement where the ceding company automatically cedes a predefined portion of certain types of risks to the reinsurer, and the reinsurer automatically accepts them, according to the terms of the treaty.

The following are characteristics of treaty reinsurance:

It covers a portfolio of risks, not individual risks.
Risks are automatically ceded and accepted based on the treaty terms.
It provides continuous cover for a specified period (e.g., one year).
It offers administrative simplicity and cost efficiency for regular business.

Functions of Reinsurance

The following are the functions of reinsurance:

Capacity: It enables primary insurers to underwrite larger risks than their capital base would normally allow.
Stability: It helps to stabilize the financial results of the ceding company by smoothing out large claims.
Catastrophe Protection: It protects insurers from severe losses arising from major catastrophic events.
Spread of Risk: It allows risks to be distributed among multiple insurers, reducing the concentration of risk.
Financial Strength: It enhances the financial solvency and security of the primary insurer.
Underwriting Expertise: Reinsurers can provide expertise and advice on underwriting complex risks.

Practical Application of Reinsurance

Reinsurance is applied when an insurer takes on a policy that is too large for it to bear alone, or when it wants to protect itself against many small claims adding up to a large sum. For example, if an insurance company insures a multi-billion naira oil rig, it will likely cede a significant portion of that risk to one or more reinsurers to avoid potential financial distress if the rig suffers a total loss. Similarly, a motor insurer might use treaty reinsurance to cover a percentage of all motor policies it issues, ensuring stability even with frequent small claims.

Teaching Methods/Instructional Techniques

Discussion, Lecture, Demonstration, Question and Answer, Visual Aids

Instructional Procedures

Step 1: Introduction

Time: 5 minutes
Teaching Skill: Set Induction
Teacher’s Activity: The teacher greets the pupils, reviews the previous lesson briefly, and then introduces the topic “Reinsurance (Cont.)” by asking pupils what they remember about reinsurance and why insurance companies need it.
Pupils’ Activity: Pupils respond to the teacher’s questions and state what they remember about reinsurance.
Learning Point: Pupils are reminded of the concept of reinsurance and prepared for the new lesson content.

Step 2: Recap of Reinsurance Meaning

Time: 5 minutes
Teaching Skill: Recall/Explanation
Teacher’s Activity: The teacher asks pupils to define reinsurance in their own words and provides a clear definition, writing it on the board.
Pupils’ Activity: Pupils offer their definitions, listen to the teacher’s explanation, and copy the definition.
Learning Point: Pupils recall and solidify their understanding of the meaning of reinsurance.

Step 3: Parties to Reinsurance Contract

Time: 7 minutes
Teaching Skill: Explanation/Identification
Teacher’s Activity: The teacher explains the two main parties involved in a reinsurance contract: the ceding company and the reinsurer, using simple examples. The teacher writes the terms on the board.
Pupils’ Activity: Pupils listen, ask questions for clarity, and identify the roles of the ceding company and the reinsurer. They copy the terms from the board.
Learning Point: Pupils understand who is involved in a reinsurance agreement.

Step 4: Forms of Reinsurance

Time: 10 minutes
Teaching Skill: Differentiation/Demonstration
Teacher’s Activity: The teacher explains and differentiates between facultative and treaty reinsurance, using charts and word cards. Examples are provided for each form, highlighting their characteristics and how they operate. The teacher writes key points on the board.
Pupils’ Activity: Pupils observe the charts, listen to the explanations, ask questions, and note the differences and characteristics of each form of reinsurance.
Learning Point: Pupils can differentiate between facultative and treaty reinsurance and state their characteristics.

Step 5: Functions of Reinsurance

Time: 8 minutes
Teaching Skill: Listing/Elaboration
Teacher’s Activity: The teacher explains the various functions of reinsurance, such as increasing capacity, providing stability, catastrophe protection, and spreading risk. The teacher lists these functions on the board.
Pupils’ Activity: Pupils listen attentively, ask clarifying questions, and list the functions of reinsurance as explained by the teacher.
Learning Point: Pupils understand and can enumerate the importance and roles of reinsurance.

Step 6: Practical Application of Reinsurance

Time: 5 minutes
Teaching Skill: Illustration/Discussion
Teacher’s Activity: The teacher provides practical examples of how reinsurance is applied in real-world scenarios, such as insuring large assets or protecting against widespread natural disasters. The teacher encourages pupils to suggest potential scenarios.
Pupils’ Activity: Pupils listen to the examples, discuss possible applications, and suggest their own scenarios.
Learning Point: Pupils grasp the real-world relevance and application of reinsurance.

Step 7: Evaluation/Review

Time: 5 minutes

Teaching Skill: Questioning/Assessment

Teacher’s Activity: The teacher evaluates the learning by asking the following questions:

Define reinsurance.
Mention the two main parties in a reinsurance contract.
State two differences between facultative and treaty reinsurance.
List three functions of reinsurance.

Pupils’ Activity: Pupils answer orally and in writing.

Learning Point: Pupils demonstrate understanding of the lesson.

Step 8: Conclusion

Time: 5 minutes
Teaching Skill: Summarization/Assignment
Teacher’s Activity: The teacher summarizes the key points of the lesson, emphasizing the importance of reinsurance for the stability of insurance companies. The teacher assigns homework: “Explain with examples how reinsurance helps an insurance company manage its risks effectively.”
Pupils’ Activity: Pupils listen to the summary and copy the homework assignment.
Learning Point: Pupils consolidate their learning and are given an opportunity for further practice.

Lesson Keywords

Reinsurance – Insurance purchased by an insurance company from another insurance company to protect itself from large losses.
Ceding Company – The primary insurer that transfers a portion of its risks.
Reinsurer – The company that accepts the transferred risks from the ceding company.
Facultative Reinsurance – Reinsurance negotiated and accepted on a case-by-case basis for individual risks.
Treaty Reinsurance – Reinsurance where risks are automatically ceded and accepted according to a pre-arranged agreement.

Differentiation

The teacher will provide additional explanations and simplified examples for pupils who require more support, while more advanced pupils will be encouraged to research and present on specific types of reinsurance treaties.

Note for teachers using this lesson plan

Ensure to use relevant local examples to make the concept of reinsurance relatable to the pupils. Encourage active participation through questions and discussions.