Reinsurance

Reinsurance allows insurers to remain solvent by recovering some or all amounts paid to claimants.

Reinsurance is insurance that an insurance company purchases from another insurance company to insulate itself (at least in part) from the risk of a major claims event.

Facultative coverage protects an insurer for an individual or a specified risk or contract. If several risks or contracts need reinsurance, they a renegotiated separately. The reinsurer holds all rights for accepting or denying a facultative reinsurance proposal.

Reinsurance reduces the net liability on individual risks and catastrophe protection from large or multiple losses. The practice also provides ceding companies, those that seek reinsurance, the capacity to increase their underwriting capabilities in terms of the number and size of risks.