Reinsurance
Definition of "Reinsurance"
Form of insurance that insurance companies buy for their own protection, "a sharing of insurance." An insurer (the reinsured) reduces its possible maximum loss on either an individual risk (facultative reinsurance) or a large number of risks (automatic REINSURANCE) by giving (ceding) a portion of its liability to another insurance company (the reinsurer).
Reinsurance enables an insurance company to expand its capacity; stabilize its underwriting results; finance its expanding volume; secure catastrophe protection against shock losses; withdraw from a class or line of business, or a geographical area, within a relatively short time period; and share large risks with other companies.
Popular Insurance Terms
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Reinstatement of an insurance policy or bond to its original face amount (face of policy) after the payment by the insurer of a loss. The purpose of this type of coverage is to indemnify ...
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Automatic reinsurance that requires an insurer to transfer (cede) and the reinsurer to accept the part of every risk that exceeds the insurer's predetermined retention limit. The reinsurer ...
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Cost per unit of insurance. ...
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