What Does Specific Reinsurance Mean?
Specific reinsurance is a reinsurance method wherein each insurance policy is separately negotiated for reinsurance. Commonly, in specific reinsurance, the insurance bought by the cedent (buyer/insurance company) is usually coverage that is insufficiently covered or has excessive limits or individual risks not covered by the reinsurance treaties. By undergoing specific reinsurance, the reinsurer (seller/insurance company) can better price the contract to reflect the involved risks.
Insuranceopedia Explains Specific Reinsurance
Reinsurance is an insurance process by which an insurance company, referred to as reinsurer, is bought by another insurance company, known as the cedent. Both reinsurer and cedent undergo a reinsurance agreement that stipulates treaty conditions, and the cedent pays the reinsurer a reinsurance premium. The cedent issues insurance policies to its own policyholders. Through a healthy reinsurance marketplace, insurance companies can still maintain solvency despite natural calamities since the costs and the risks are spread out.
With a specific reinsurance method of negotiation, the reinsurer entails a higher overhead cost because qualified personnel individually administer and underwrite each risk. Once the cedent accepts all the conditions, the reinsurer issues a specific insurance certificate to the cedent to reinsure that individual policy.