Reinsurance Assumed
What Does Reinsurance Assumed Mean?
“Reinsurance assumed” refers to the agreement by one insurer to take on the risks from another insurer. In doing so, the reinsurer becomes financially responsible for those risks, including the obligation to honor any claims made by the policyholders of the original insurer.
In return for assuming this risk, the original insurer, known as the ceding company, pays the reinsurer for the transfer.
This process is also referred to as assumed reinsurance or assumption reinsurance.
Insuranceopedia Explains Reinsurance Assumed
Reinsurance is a method by which insurance companies transfer risk to other insurers, known as reinsurers. This is typically done when the original company is unsure about its ability to retain the risk while maintaining its financial stability.
On the other hand, reinsurers accept risks because they are confident in their ability to manage the associated liabilities. In most cases, reinsurers benefit from assuming these risks rather than having their financial stability threatened by them.
A reinsurer may take on a single risk or a specific type of insurance policy, or it may assume multiple risks or a range of insurance lines. The extent of the risk transfer is determined by the contract between the reinsurer and the ceding company.
