REINSURANCE “Arrangements by which an insurer, for a specified fee or premium, issues its policies to cover certain risks underwritten or otherwise managed by another insurer or reinsurer. The insurer then transfers all, or substantially all, of the liabilities thereunder to such insurers by means of reinsurance.
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UK: an arrangement whereby one insurer agrees to accept business on behalf of others, or to cede the business to others; such an arrangement may be used in markets where the fronting company is well established and finds it easier to obtain business than the companies for which it agrees to front, or to conceal the identity of the company to which the business is being channelled.”
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“Often the entities an insured does business with want a policy written by a major carrier with an acceptable rating with Best’s or another insurance rating service. If the insured is using a captive, this can present a problem.Many insurance companies will “”front”” for the captive. That is, the policy is written on the company’s paper, but the company reinsures the majority of the risk with the captive.
For example, a commercial developer may want a building contractor to provide liability insurance with an A++ rated insurance company before building a new 10-story office building. If the contractor is covered by a captive, he or she pays a fee to an A++ company who then issues the liability policy. The fee covers, other than just expenses, the risk that the rated company will not be able to collect from the captive in the event of a loss.”
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UK: The issue of a policy by an authorised insurer who cedes 100 per cent (or nearly that amount) to a second insurer or a reinsurer who is not an admitted insurer in the state concerned. The authorised insurer ‘fronts’ the risk for a specified fee or premium.
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The practice, in reinsurance, of the ceding company retaining only a small portion of a risk and ceding the remainder to a reinsurer.