Reinsures

Reinsures is the verb form of reinsure, meaning to transfer part or all of an insurance risk from a primary insurer (the ceding company) to another company known as a reinsurer. The purpose is to share risk, stabilize results, and free capital so the ceding company can underwrite additional policies or protect against large losses. The reinsurer assumes responsibility for a portion of claims in exchange for a portion of the premiums.

In a typical reinsurance arrangement, the ceding company and the reinsurer enter into a contract called a reinsurance treaty or a facultative reinsurance agreement. Treaties cover a book of business or defined classes of policies, and facultative reinsurance is arranged on a case-by-case basis. Reinsurance contracts specify terms such as the proportion of risk transferred (proportional or non-proportional), retention levels, limits, and the calculation of premiums and reimbursements. Proportional reinsurance (pro rata) shares both premiums and losses in predefined percentages, while non-proportional (excess of loss) triggers payments only when losses exceed a defined threshold. Ceding commissions may be paid by the reinsurer to the ceding company.

Reinsures serves several functions: it distributes risk, improves solvency and capital efficiency, and expands underwriting capacity. It also involves mechanisms such as retrocession, where reinsurers further transfer risk to other reinsurers. The market is global and highly regulated, with oversight aimed at maintaining insurer solvency, capital adequacy, and consumer protection.