Spread Loss Reinsurance

What Does Spread Loss Reinsurance Mean?

Spread loss reinsurance is a type of reinsurance in which the reinsurer gets paid by the ceding company for a period of time until the latter collects a lump sum from the former when it experiences a financial loss.

Insuranceopedia Explains Spread Loss Reinsurance

This payment scheme is a way for insurers and reinsurers to protect themselves from future losses.

The insurer (the ceding company) pays the reinsurer (the cedant) money for premiums over a long period of time. It usually does this while doing good business. When the insurer experiences a considerable financial loss, the reinsurer gives it a large sum of money to cover that loss. Afterwards, the insurer resumes paying the reinsurer, making relatively small payments spread out over several years.