What Does Time and Distance Reinsurance Mean?
Time and distance reinsurance is a type of reinsurance policy that was highly popular in the United Kingdom, especially London. These insurance companies would pay a large, lump sum payment to a reinsurance company, such as Lloyd’s, and the latter would then make regular payments that matched the estimated insurance claim payments to the former.
Insuranceopedia Explains Time and Distance Reinsurance
Insurance companies used time and distance reinsurance to get a better return on their money. Large reinsurers could leverage their size to make more profitable investments than were possible for smaller insurance companies. Even with the reinsurance fee, time and distance reinsurance worked out to be a better deal for some companies.
However, the large reinsurers changed their payout formula, which made this product less profitable for small insurance companies. As a result, the demand for time and distance reinsurance has mostly disappeared, and this product is rarely sold today.