Reinsurance, at first, is insurance. Therefore, to understand reinsurance, we can start with the concept of insurance.
Insurance is a way to mitigate risks. The risks are mostly financial risks due to either medical problems, or natural disasters, or other sources.
We don't want to go bankrupt because of, say, the unexpected high medical bills. It does not always happen, but it is possible at some points. That's why we buy insurance to mitigate some risk.
By giving up a little money each pe...