Spread Loss Reinsurance
Updated: 03 December 2024
What Does Spread Loss Reinsurance Mean?
Spread loss reinsurance is a type of reinsurance where the ceding company makes periodic payments to the reinsurer, and in return, the reinsurer provides a lump-sum payment to the ceding company when it incurs a financial loss.
Insuranceopedia Explains Spread Loss Reinsurance
This payment scheme helps both insurers and reinsurers protect themselves from future losses.
The insurer (ceding company) pays the reinsurer (cedent) premiums over an extended period, typically during a period of good business performance. When the insurer faces a significant financial loss, the reinsurer provides a lump sum to cover that loss. Afterward, the insurer resumes paying the reinsurer with relatively small, spread-out payments over several years.
