What is the definition of Retrocession?
Retrocession refers to the portion of reinsurance that the reinsurer also reinsures.
When insurance companies sell a policy, they will pass on part of the policy coverage to a reinsurer. In retrocession, the reinsurer again gets reinsurance for a portion of what they took on.
In the same principle that insurance companies reinsure to protect their financial stability, reinsurers also do the same since risk is spread out further.
For instance, an insurance company issues a life insurance policy for $1,000.000. The insurance company retains $400,000 of the risk, and reinsures the $600,000. The reinsurance company that accepts the $600,000 coverage passes on half of that. That means that the exposure of the reinsurance company is only $300,000 and not $600,000. If the insured person dies, the reinsurance company only stands to pay $300,000 of the claims.
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- Retrospective Rating
- Return on Equity
- Revocable Beneficiary
- Rider
- Risk
- Risk Management
- Risk Retention Groups
- Risked-Based Capital
- Rollover
- Salvage
- Retention
- Residual Market
- Residual Disability
- Residual Disability Insurance
- Reserves
- Repurchase Agreement / Repo
- Replacement Cost
- Renters Insurance
- Renewable Term Insurance Policy
- Relation of Earnings to Insurance Clause