Reinsurance

Reinsurance is insurance that an insurance company purchases from another insurance company to protect itself (at least in part) from the risks that are too big for itself, like a major disaster. With reinsurance, the company passes on ("cedes") some part of its own insurance liabilities to the other insurance company. The company that purchases the reinsurance policy is referred to as the "ceding company" or "cedent". The company issuing the reinsurance policy is referred to as the "reinsurer". In the classic case, reinsurance helps insurance companies to remain solvent after major claims events, like hurricanes or wildfires. 

The reinsurer may be either a specialist reinsurance company, which only undertakes reinsurance business, or another insurance company.

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Category:Insurance