Forms of reinsurance and terminology
Forms of reinsurance and terminology

The following Insurance & Reinsurance practice note provides comprehensive and up to date legal information covering:

  • Forms of reinsurance and terminology
  • The parties to a reinsurance contract and reinsurance terminology
  • Forms of reinsurance
  • Proportional and non-proportional reinsurance
  • Facultative reinsurance and treaty reinsurance
  • Types of reinsurance treaty and specialised reinsurance
  • Horizontal cover and reinstatement of limits

The parties to a reinsurance contract and reinsurance terminology

The principal parties to any reinsurance contract are the reinsurer, who assumes the subject risk in return for premium, and the ‘reinsured’, who may also be referred to as the ‘reassured’, or the ‘cedant’. Where the risk to be reinsured itself arises under a contract of reinsurance the reinsurer is commonly referred to as a ‘retrocessionaire’.

When the contract of reinsurance is formed, or a new risk is reinsured under a contract for treaty reinsurance, the reassured is said to have ‘ceded’ part or all of the subject risk. The specific incidence of doing so is called a ‘cession’ or a ‘retrocession’, in the case of a reinsurance of reinsurance. Any part of the subject risk that is not ceded to the reinsurer is referred to as the cedant’s ‘retention’.

As with insurance contracts generally the task of effecting reinsurance is often carried out by an intermediary broker, referred to as the ‘placing’ broker. Unlike other forms of insurance, it is common for a reinsurance broker to place the risk that is to be ceded as well as the corresponding reinsurance. The former may be referred as the 'inwards’ policy or the ‘ceded risk’ and the latter as the ‘outwards’ policy. For the broker, it is therefore imperative to consider at all times for whom it is acting

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