Reinsurance contracts are those contracts in which one insurance company transfers its risk to another insurance company.
There are basically two types of reinsurance namely : a) facultative; b) reinsurance by treaty.
Reinsurance occurs when multiple insurance companies share risk by purchasing insurance policies from other insurers to limit the total loss the original insurer would experience in case of disaster.Expertise - The expertise of another insurer can help a company obtain a proper rating and premium.
DEFINITION of 'Ceding Company' An insurance company that passes the part or all of its risks from its insurance policy portfolio to a reinsurance firm. Passing off risk in this manner allows the ceding company to hedge against undesired exposure to loss and frees up capital to use in writing new insurance contracts.
A cedent is a party in an insurance contract who passes financial obligation for certain potential losses to the insurer.The term cedent is most often used in the reinsurance industry, although the term could apply to any insured party.
Companies often do everything they can to protect the “long-term broker relationship.” This demonstrates a complete lack of understanding by ceding company management of their own fiduciary duties. The fiduciary duties of officers of insurance companies are to the company stakeholders, not to the reinsurance brokers.