REINSURANCE

Reinsurance is a method for 
an insurance company to share 
the risk of large losses with 
other insurance companies. It is 
insurance purchased by an 
insurer, and it spreads risks 
across alternative institutions 
to protect against unforeseen 
or extraordinary losses. It 
functions in the same method 
as insurance but on a larger 
scale. For consideration, a 
reinsurer agrees to indemnify 
the ceding company against all 
or part of the loss it could 
sustain under the policies which 
it has issued. It generally 
involves a pool of specialist 
reinsurers, such as earthquake 
and hurricane reinsurers, 
operating on a global basis. This 
enables a client to obtain 
coverage that is beyond the 
level of risk that a single 
company can assume.