Assumption Reinsurance

What Does Assumption Reinsurance Mean?

Assumption reinsurance refers to the process of transferring a policy from the original insurance company to another insurer. The latter then assumes all responsibilities related to the policy, including collecting payments and paying claims, thereby fully absolving the original insurer of these obligations.

Insuranceopedia Explains Assumption Reinsurance

Reinsurance in its typical form involves two parties: the ceding company and the reinsurer, who share responsibilities related to a policy. Some claims may be managed by the ceding company, while others may be transferred to the reinsurer. However, in the case of assumption reinsurance, the entire policy is fully transferred to the reinsurer. In limited reinsurance, the policyholder is generally not notified about the transfer. In contrast, assumption reinsurance requires that the policyholder be notified of the transfer, as dictated by law. Assumption reinsurance is also referred to as novation.