Assumption Reinsurance

Published: | Updated: October 12, 2016

Definition - What does Assumption Reinsurance mean?

Assumption reinsurance refers to the act of transferring a policy from the original insurance company to another insurance company. The latter then takes all of the responsibilities of the policy including collection of payments and the payment of claims, totally absolving the former.

Insuranceopedia explains Assumption Reinsurance

Reinsurance in its typical form involves parties, the ceding company, and the reinsurer in activities relating to a policy. Usually, responsibilities are shared. Some claims might be managed by the ceding company and some might me transferred to the reinsurer. However, not in the case of assumption reinsurance where the policy is now fully in the hands of the reinsurer. In so-called limited reinsurance, the policyholder is not usually notified about the ceding. In assumption reinsurance, the law dictates that the policyholder should be given notice about the transfer. Assumption insurance is also called novation.

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