PURPOSES OF REINSURANCE

Assumption Reinsurance

Indemnity Reinsurance

PROPORTIONAL REINSURANCE

Types of Plans

NONPROPORTIONAL REINSURANCE

Stop-Loss Reinsurance

Catastrophe Reinsurance

Spread-Loss Reinsurance

REINSURANCE AGREEMENT

Types of Agreement

Insolvency of the Primary Insurer

Experience Rating

Supplementary Coverages

Substandard Reinsurance

Reinsurance is a device by which one insurance company or insurer transfers all or a portion of its risk under an insurance policy or a group of policies to another company or insurer. The company that issued the policy initially is called the direct-writing or primary company (also ceding company); the company or organization to which the risk is transferred is called the assuming company or reinsurer. The act of transferring the insurance from the direct-writing company to the reinsurer is called a cession. If the reinsurer should, in turn, transfer to one or more companies all or a portion of the risk assumed from the primary company, the transaction is referred to as a retrocession. Thus the primary insurer cedes insurance to a reinsurer, which may then retrocede the coverage to still other companies.