What Does Portfolio Reinsurance Mean?
Portfolio reinsurance is the transfer of a considerable number of policies from one insurance company to another. The policies transferred may be insurance products, such as commercial property policies or all of the policies from one area or territory. Insurance companies engage in portfolio reinsurance to guard against insolvency.
Insuranceopedia Explains Portfolio Reinsurance
Reinsurance is the transfer of risks from an insurance company to a reinsurance company. The company transferring the risk is known as the ceding company, while the one taking it on is the reinsurer.
In the case of portfolio reinsurance, a large number of policies are involved. Portfolio reinsurance might be purchased when the ceding company is no longer confident about their ability to fund a particular type of policy after it has issued several of them, or they may have moved into a different business direction. When this happens, the reinsurer becomes responsible for the liability of the risks that have been ceded.