What Is Reinsurance?
Reinsurance is insurance an insurer buys to share the risk on policies it has issued. It usually does not give you a claim against the reinsurer, so start with the insurer named in your policy unless the contract gives you a direct right.
What Reinsurance Is
Reinsurance is insurance for insurance companies. The ceding insurer keeps the policyholder relationship and transfers some or all of the risk to another insurer in return for premium.1,2
The assuming insurer indemnifies the cedent for all or part of losses on policies the cedent has issued. That share can be a percentage of each loss, or it can attach only above a threshold. A treaty covers a class of business; a facultative placement covers a named risk. A reinsurer can cede further through retrocession.3,1
What Does Reinsurance Not Prove?
The reinsurer's duty arises when the ceding company has incurred liability on the original policy. Without a cut-through, the original insured generally has no direct claim on the reinsurer.1,3
Reinsurance is not a finding that the cedent can collect every recoverable, that the policyholder is safer, or that the reinsurer is the insurer of record. Fronting is a particular pattern of cession, not a synonym for reinsurance.1,3
