Practice Areas
Reinsurance
Reinsurance is an arrangement under which an insurance company buys insurance from another company to assume some of its risks. The insurer shifts or "cedes" some of the risk and a share of the associated premiums to the reinsurer. Reinsurance has thus been generally defined as a contract under which one party, the reinsurer, agrees to indemnify another, the reinsured, either in whole or in part, against loss or liability, which the reinsured may sustain under a separate contract of insurance with the original insured.
Reinsurance is intended to benefit insurance companies and the public interest, by increasing a company's capacity to accept new risks, allowing it to write risks that might otherwise be beyond its capacity, decreasing capital requirements, and enabling it to spread the risk of catastrophic losses, among other things. While reinsurance contracts are usually between insurance companies, the reinsured need not be an insurance company, but may be a self-insurer, or an employee benefit trust. The authorization given in a mutual company in the members' applications, for reinsurance of the risks assumed, makes the mutual company the agent of its members to contract for reinsurance.
Reinsurance is not the same as "double insurance", which involves insuring the same interest.
