Reciprocity

What Does Reciprocity Mean?

Reciprocity refers to the legal exchange of privileges between states, businesses, or individuals. In the context of insurance, it involves the mutual exchange of insurance shares between companies, typically in equal amounts.

Insuranceopedia Explains Reciprocity

Reciprocity is a quid pro quo, or mutual exchange, that is legalized when entities act reciprocally. For example, in the United States, this arrangement allows a licensed nurse in New Mexico to practice in New York, and similarly, a New York nurse can practice in New Mexico under the same privilege.

In the context of insurance, reciprocity occurs when an insurance company transfers a portion of its policies or coverable risks to a reinsurer, and in return, the reinsurer transfers some of its policies and risks back to the company.