Insurance bought by insurers.
A reinsurer assumes part of the risk and part of the premium originally taken by the insurer, known as the primary company. Reinsurance effectively increases an insurer’s capital and therefore its Capacity to sell more coverage. The business is global and some of the largest reinsurers are based abroad. Reinsurers have their own reinsurers, called retrocessionaires. Reinsurers don’t pay policyholder claims. Instead, they reimburse insurers for claims paid. (See Treaty reinsurance; Facultative reinsurance)
The practice whereby one party called the Reinsurer in consideration of a premium paid to him agrees to indemnify another party, called the Reinsured, for part or all of the liability assumed by the latter party under a policy or policies of insurance which it has issued. The reinsured may be referred to as the Original or Primary Insurer, or Direct Writing Company, or the Ceding Company.
The transaction whereby the assuming insurer, for a consideration, agrees to indemnify the Ceding Company against all, or a part, of the loss which the latter may sustain under the policy or policies which it has issued.