What Does Reinsurer Mean?
A reinsurer is an insurance company that takes financial risks from other insurance companies. They will also be responsible for future claims related to these risks.
Insuranceopedia Explains Reinsurer
An insurance company that takes on too high of a risk has the possibility of going bankrupt. By passing this risk on to another company, they reduce the odds of reaching that outcome.
Insurance companies might also transfer a risk to a reinsurer because they might gain profit from the transfer if the payment to the reinsurer is less than what it received from the insured.
A risk can also be transferred when the original company (the ceding company) believes that the reinsurer knows more about the risk and its management.