Reinsured

What Does Reinsured Mean?

An insurance company is considered reinsured when it purchases a reinsurance policy from a reinsurer. Insurance companies obtain this type of insurance as a precautionary measure to ensure that all of their risks, in addition to those of their policyholders, are adequately covered.

Insuranceopedia Explains Reinsured

Once an insurance company transfers certain risks to a reinsurance company, the reinsurer becomes responsible for providing financial reimbursement in the event of a legitimate claim. Insurance companies that purchase reinsurance must pay a premium for it, just as regular policyholders do for standard insurance. Reinsurance is essential for preventing an insurance company from going bankrupt if numerous claims are filed simultaneously.