Reinsurance

Reinsurance is a process in which an insurance company transfers part of the risk it has accepted to another insurance company, known as the reinsurer. It helps insurers manage large or unexpected losses and maintain financial stability. The original insurer, called the ceding company, pays a premium to the reinsurer in exchange for protection against specified risks. Reinsurance can be arranged for individual large risks or a portfolio of policies. It allows insurance companies to increase their capacity to underwrite more policies while reducing their exposure to major claims. Overall, reinsurance strengthens the insurance system by spreading risks among multiple insurers and helping companies remain financially stable.