Insurance
Reinsurance
Insurance for insurance companies.
Last reviewedWhat does Reinsurance mean?
Reinsurance is when an insurer passes part of its risk to another company, a reinsurer, in exchange for part of the premium. It protects the insurer from very large or clustered losses, such as a hurricane or earthquake that hits many customers at once, and lets it write more business on the same capital. Example: under a quota share deal, the insurer cedes 30 percent of every policy, so the reinsurer takes 30 percent of the premium and pays 30 percent of the claims, often paying the insurer a commission toward its selling costs. Large reinsurers include Munich Re, Swiss Re and Hannover Re.
Where does it come up in case interview prep?
- How insurance works and makes moneyLesson in Insurance: life, property and casualty, and health
- Insurance unit economics: the combined ratio at workLesson in Insurance: life, property and casualty, and health
- Insurance: players, trends, regulation, and how to crack the casesLesson in Insurance: life, property and casualty, and health
Related terms
- Loss ratioClaims as a share of premiums earned.
- Combined ratioLoss ratio plus expense ratio. Below 100 percent means an underwriting profit.
- TakafulIslamic insurance built on mutual help, where members share each other's losses.
- Expense ratio (insurance)An insurer's costs of selling and running policies as a share of premiums.
- Float (insurance)Premiums an insurer holds and invests before it pays claims.
- PersistencyThe share of policies still in force and paying after a set time.