REINSURANCE Meaning and
Definition
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Reinsurance is a financial mechanism used by insurance companies to transfer a portion of their risks and liabilities to another insurance company or multiple insurers, known as reinsurers. It serves as a means for insurance companies to manage their exposure to large and catastrophic losses, minimize their risk, and improve their financial stability.
In this process, the insurer, also referred to as the ceding company, pays a premium to the reinsurer in exchange for the latter assuming a portion of its risks. Reinsurance can be employed for all types of insurance, including property, casualty, life, health, and even specialty lines. The reinsurer, in turn, agrees to indemnify the ceding company for covered losses, effectively sharing the financial impact of claims.
Reinsurance comes in various forms, such as proportional or quota share reinsurance, where the reinsurer assumes a fixed percentage of each policy issued by the ceding company. It can also be non-proportional or excess of loss reinsurance, wherein the reinsurer steps in only when losses exceed a certain threshold. Other forms include facultative reinsurance, which involves the reinsurer considering individual risks on a case-by-case basis, and treaty reinsurance, which involves a broader agreement covering a specific class of business.
The reinsurance market is highly specialized and often involves global transactions. Reinsurance plays a crucial role in maintaining the stability and financial security of the insurance industry as a whole, as it allows insurance companies to efficiently manage their risks, maintain solvency, and protect policyholders from the potentially devastating consequences of large or unexpected losses.
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Insurance by one company in another of all or part of a risk already assumed by the first company.
A practical medical dictionary. By Stedman, Thomas Lathrop. Published 1920.
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A contract in which the first insurer is relieved by another from the risks he had undertaken.
Etymological and pronouncing dictionary of the English language. By Stormonth, James, Phelp, P. H. Published 1874.
Top Common Misspellings for REINSURANCE *
* The statistics data for these misspellings percentages are collected from over 15,411,110 spell check sessions on www.spellchecker.net from Jan 2010 - Jun 2012.
Other Common Misspellings for REINSURANCE
Etymology of REINSURANCE
The word "reinsurance" is derived from two separate words: "re" and "insurance".
The prefix "re-" is of Latin origin, and it means "again" or "back". It is used to indicate repetition or intensity. In the case of "reinsurance", it suggests the repetition or continuation of the insurance process.
The word "insurance" comes from the late Latin word "assurantia", which means "assurance" or "protection". It can be traced back to the Latin verb "assurare", meaning "to assure" or "to make safe". "Insurance" refers to a contract or agreement in which an individual or entity, known as the insurer, guarantees financial coverage or indemnification for specified risks, in exchange for premium payments from the insured.
Therefore, "reinsurance" essentially means "insurance for insurance" or the act of insuring the risks of an insurance company itself.
Idioms with the word REINSURANCE
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Automatic Reinsurance
"Automatic Reinsurance" is an insurance term that refers to a contractual agreement in which an insurer automatically cedes a portion of its risk to another reinsurer without the need for individual negotiation or approval for each policy or claim. It typically involves predefined terms and conditions that trigger the automatic transfer of risk. This arrangement allows the insurer to share its risks and protect its financial stability by transferring a portion of its insurance liabilities to a reinsurer on a continuous basis.
Similar spelling word for REINSURANCE
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