What Is Reinsurance?
How a ceding insurer transfers risk to another insurer, and why that contract is not a direct policyholder guarantee.
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 It Does 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]
What to Confirm
Sources
- Insurance Topics | Reinsurance. National Association of Insurance Commissioners; Insurance for insurance companies; cedent transfers risk; reinsurer's obligation arises when the company's original-policy liability has been incurred; retrocession; last updated 10/24/2025. Accessed 2026-09-21. Source 1.
- Glossary of Insurance Terms. National Association of Insurance Commissioners; Reinsurance; Authorized Reinsurance. Accessed 2026-09-21. Source 2.
- Receivers' Handbook materials — Reinsurance Basics. National Association of Insurance Commissioners; Reinsurance as indemnity of the ceding company; proportional versus non-proportional; treaty versus facultative; generally the reinsurer has no direct obligation to the original insured absent a cut-through. Accessed 2026-09-21. Source 3.
