What Does Share Reinsurance Mean?
Share reinsurance refers to the obligations of the ceding company and the reinsurer about a policy. How these obligations are divided is dependent on the contract between the two. A percentage of the coverage can either be passed on the reinsurer or the reinsurer can take on the excess of the financial limit of the ceding company.
Insuranceopedia Explains Share Reinsurance
An insurance company can find itself unable to finance all the policies. To make itself financially stable, it contacts another company to share responsibilities with its policies. It may pass on policy obligations or ask the company, the reinsurer, to share these obligations.
The ceding company can decide that a certain amount of coverage is its limit and thus pass on the excess amount to the reinsurer. This kind of share reinsurance is called surplus share.
The other type of share reinsurance is when the ceding company assigns a portion of a type of policy to be covered by the reinsurer. This is called quota share reinsurance.