Definition - What does Reinsurance Broker mean?
A reinsurance broker is an intermediary individual or firm who is paid a fee or commission to find and place new business on behalf of both the insured client and insurer. This can involve negotiating rates or contracts while sourcing the best-suited policies on the market.In the case of reinsurance, the insured client is an insurance company looking to acquire protection or reinsurance from another larger insurance company for a specific risk.
Generally, these insurers purchase reinsurance for the following for four reasons:
- To limit liability on a specific risk
- To stabilize their losses
- To protect themselves against catastrophes
- To increase their capacity to take on new clients.
When multiple insurance companies purchase insurance policies from the same reinsurer they share the risk and limit of their own total loss in the case of a specific event or disaster. Brokers recommend policies that are the best solution and coverage for the potential loss at the most affordable premiums due to their vast knowledge of the current reinsurance market.
Insuranceopedia explains Reinsurance Broker
The process of purchasing reinsurance can be time-consuming and overly complicated, which is why many insurance companies rely on the skills of reinsurance brokers. Reinsurance brokers' specialized skills help them get the best deals possible while supporting the before and after-sales experience. Reinsurance brokers support insurance companies in placing the risk and choosing the most appropriate reinsurer by having all the relevant information about contracts and premiums.
Once the contracts are placed the reinsurance broker continues to advise on and draft new contracts, collect payments and support with claims. They also continue to support the insured once the contract ends with reporting of liabilities and closing open claims. These duties are only extended to insurance companies, who in turn offer advice to individual policyholders. Reinsurance brokers have no direct link to individual policyholders.