Reinsurance

Reinsurance is a form of insurance contract which protects insurance firms from risks relating to the policies they underwrite. Reinsurance firms contract with insurers to undertake to cover all or part of the cost of certain policies, in exchange for a cash payment (as with regular insurance) or a percentage of the premiums of the policies reinsured. In addition to protecting against risk, liabilities assumed by the reinsurer no longer count against the primary insurer’s underwriting capacity, enabling the company to underwrite more policies.