Reinsurance

Reinsurance is insurance that is purchased by an insurance company, in which some part of its own insurance liabilities is passed on ('ceded') to another insurance company. The company that purchases the reinsurance policy is called a 'ceding company' or 'cedent' or 'cedant' under most arrangements. The company issuing the reinsurance policy is referred simply as the 'reinsurer'. In the classic case, reinsurance allows insurance companies to remain solvent after major claims events, such as major disasters like hurricanes and wildfires. In addition to its basic role in risk management, reinsurance is sometimes used to reduce the ceding company's capital requirements, or for tax mitigation or other purposes. Reinsurance is insurance that is purchased by an insurance company, in which some part of its own insurance liabilities is passed on ('ceded') to another insurance company. The company that purchases the reinsurance policy is called a 'ceding company' or 'cedent' or 'cedant' under most arrangements. The company issuing the reinsurance policy is referred simply as the 'reinsurer'. In the classic case, reinsurance allows insurance companies to remain solvent after major claims events, such as major disasters like hurricanes and wildfires. In addition to its basic role in risk management, reinsurance is sometimes used to reduce the ceding company's capital requirements, or for tax mitigation or other purposes.