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Tuesday, March 22, 2005

Retrocession

In insurance, the transfer of risk from a reinsurer to another reinsurer is called a retrocession, which can therefore be characterised as reinsurance company to reinsurance company insurance. By accepting the business being reinsured by another reinsurer, the accepting reinsurer becomes a retrocessionaire.

It is not unusual for a reinsurer to buy reinsurance protection from other reinsurers. For example, a reinsurer which provides proportional, or pro-rata, reinsurance capacity to insurance companies may wish to protect its own exposure to catastrophes by buying excess of loss protection.

Or, a reinsurer which provides excess of loss reinsurance protection may wish to protect itself against an accumulation of losses in different branches of business which may all become affected by the same catastrophe. This may happen when a windstorm causes damage to property, automobiles, boats, aircraft and loss of life.

1 Comments:

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