Reinsurance

Definition

• Insurance companies commonly transfer portions of their risk portfolio to other insurers in order to lessen the blow when a substantial insurance claim is filed. Using reinsurance to spread risk amongst multiple insurers allows insurance companies to take on larger and more diverse obligations while lowering the risk of insolvency for the insurer. The insurer spreading the insurance is known as the "ceding party", while the insurer taking on a portion of the insurance is called a "reinsurer." Reinsurance is also known as "insurance for insurers."

Synonyms
insurance for insurers

Related Terms and Acronyms

• Approved for Reinsurance — Definition,
  • A company that is certified to provide reinsurance in a certain area.
• Ceding Party — Definition,
  • In reinsurance, a ceding party is an insurance company that spreads liability to a reinsurer in order to lower risk.
• Direct Written Premiums — Definition,
  • All the premiums written by an insurer except those ceded to reinsurers.
• Finite Reinsurance — Definition,
  • A reinsurance arrangement where the reinsurer only takes on a limited amount of risk from the ceding party.
• Insurance Cycle — Definition,
  • A cycle of soft and hard market conditions observed in the insurance and underwriting industry.
• Lloyd's of London — Company,
  • A market for insurance and reinsurance based in London, England where Lloyd's members, underwriters and financial backers can spread and share risk.
• Lloyd's Syndicates — Definition,
  • A group of Lloyd's of London underwriters.
• Premium — Definition,
  • A payment made to an insurance company for insurance coverage.
• Reciprocal Insurance Exchange — Definition,
  • A group of individuals, firms and corporations that mutually insure each other.
• Reinsurance Ceded — Definition,
  • The amount of insurance that is reinsured with another insurance company.
• Reinsurance Recoverables to Policyholder Surplus — Definition,
  • A method used to determine how much an insurer relies on reinsurance.
• Reinsurer — Definition,
  • An insurance company that provides coverage for a portion of another insurance company's risk.
• Secondary Market — Definition,
  • A market where financial instruments such as stocks, bonds, options and futures are bought and sold to investors.
• Syndicated Loans — Definition,
  • Loans given to a company that are backed by a group of banks who share the risk of a large transaction. There is usually a lead bank and several participating banks.
• Underlying Retention — Definition,
  • The liability an insurance company still retains after ceding liability to a reinsurer.