Share Reinsurance
What Does Share Reinsurance Mean?
Share reinsurance refers to the division of obligations between the ceding company and the reinsurer concerning a policy. The specific allocation of these obligations is determined by the contract between the two parties. A percentage of the coverage may be transferred to the reinsurer, or the reinsurer may assume responsibility for any excess beyond the financial limit of the ceding company.
Insuranceopedia Explains Share Reinsurance
An insurance company may find itself unable to finance all its policies. To ensure financial stability, it reaches out to another company to share the responsibilities of its policies. It may either transfer policy obligations or request the reinsurer to assume these obligations.
The ceding company can set a specific coverage limit and pass any excess to the reinsurer. This type of share reinsurance is known as surplus share.
Another type of share reinsurance occurs when the ceding company assigns a portion of a specific type of policy to be covered by the reinsurer. This is referred to as quota share reinsurance.
