MEDICAL,USA: 1. Insurance agreement in which an insurance company pays a premium into a pool fund and any insurance claims paid by the insurer above a specific dollar amount are covered partially or totally by the pool. 2. Practice of one insurance company purchasing insurance from a second company for the purpose of protecting itself against part or all of the losses it might incur in the process of honoring the claims of its policyholders (e.g., catastrophic care). The original company is called the ceding company; the second is the assuming company or reinsurer . Reinsurance may be sought by the ceding company to protect itself against losses in individual cases beyond a certain amount, where competition requires it to offer policies providing coverage in excess of these amounts; to offer protection against catastrophic losses in a certain line of insurance such as aviation accident; or to protect against mistakes in rating and underwriting in entering a new line of insurance such as major medical. Also called risk-control insurance or stop-loss insurance .
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A contract under which a reinsurer agrees to pay specified types and amounts of underwriting loss incurred by an insurer or another reinsurer in return for a premium. Reinsurance serves to ‘lay-off’ risk. Reinsurance may be proportional or non-proportional and may take the form of a cover in respect of an individual risk exposure (see facultative risk) or cover in respect of multiple risk exposures (see treaty). Reinsurance accounts for more than half of Lloyd’s total business.
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US: A transaction in which one party, the “reinsurer,” in consideration of a premium paid to it, agrees to indemnify another party, the “reinsured,” for part or all of the liability assumed by the reinsured under a policy of insurance that it has issued. The reinsured may also be referred to as the “original” or “primary” insurer or the “ceding company.”
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US: Assumption by one insurance company of all or part of a risk undertaken by another insurance company. The acceptance by one or more insurers, called re-insurers, of a portion of the risk underwritten by another insurer who has contracted for the entire coverage. The purchase of insurance by an insurance company from another insurance company (re-insurer) to provide it protection against large losses on cases it has already insured.
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UK: Process whereby a reinsurer agrees to indemnify an insurer, the cedant, against all or part of the loss that the latter may sustain under the original policy or policies it has issued. Reinsurance provides a secondary system of risk spreading reducing the potential losses that could attach to insurers. Reinsurers themselves may reinsure, a process known as retrocession. Under EU regulation, the use of reinsurance lowers the required minimum margin. Reinsurance may be proportional or non-proportional and arranged either on a facultative basis or by treaty.
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The business of insuring insurance companies. By ceding a portion of its business to a reinsurance company, an insurer spreads the risk of exposure to catastrophic loss. Reinsurance enables an insurance company to do the following ,1. expand its capacity ,2. stabilize its underwriting results ,3. finance its expanding volume ,4. secure catastrophe protection against shock losses ,5. withdraw from a class or line of business, or a geographical area, within a specified period of time.
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REINSURANCE: The practice of insuring again. One of the functions of the Direct Insurance is to spread the loss so that the losses of the few who have claims will be carried by the many insuring that type of risk. Reinsurance further spreads the risk so that the Insurers of the few who have claims will be protected from individual heavy losses by the Reinsurance market meeting a substantial part of the claim. The Company with which the public insure is called a Direct or Ceding office and the Company accepting business from the Ceding office is called a Reinsurer. Reinsurance ceded is the unit of insurance transferred to a reinsurer by a ceding company. In India, Reinsurance of General Insurance is being governed by IRDA General Insurance – Reinsurance Regulations, 2000.
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REINSURANCE: The transaction whereby the assuming insurer (“reinsurer”), in consideration of premium paid, agrees to indemnify another insurer (” ceding company) against all or part of the loss which the latter may sustain under a specific policy or group of policies which it has issued.