Specific Reinsurance
What Does Specific Reinsurance Mean?
Specific reinsurance is a reinsurance method where each insurance policy is individually negotiated for reinsurance. It is often used when the cedent (the primary insurance company) requires coverage for risks that are inadequately covered, exceed policy limits, or are excluded from standard reinsurance treaties. By opting for specific reinsurance, the reinsurer (the secondary insurance company) can tailor the pricing of the contract to accurately reflect the associated risks.
Insuranceopedia Explains Specific Reinsurance
Reinsurance is a process in which one insurance company, known as the reinsurer, provides coverage to another insurance company, called the cedent. Under a reinsurance agreement, which outlines treaty conditions, the cedent pays a reinsurance premium to the reinsurer. The cedent continues issuing policies to its policyholders while using reinsurance to spread costs and risks. A robust reinsurance marketplace helps insurance companies maintain solvency, even in the face of natural disasters, by distributing financial burdens.
In the specific reinsurance method, the reinsurer incurs higher overhead costs because qualified personnel must individually assess and underwrite each risk. Once the cedent agrees to all terms, the reinsurer issues a specific insurance certificate to cover the individual policy under the reinsurance arrangement.
