Who insures insurance companies

Agent-Broker Questions Auto Insurance Business Insurance General Insurance Questions Health Insurance Homeowners Insurance Insurance Companies Life Insurance Workers Compensation

Reinsurers may insure insurance companies but insurance companies “self-insure” or set aside reserves to cover any expected payouts under the policies.

How it works:

Sometimes insurance companies hold all the risk from underwriting policies.

Sometimes insurers buy insurance from reinsurers for part of the risk.

Insurers almost never lay off all such risk to others.

Reinsurance companies take a pool of portions of insurance policies underwritten by insurance companies in exchange for a fee.

The reinsurer insures that pool of partial policies.

The reinsurer may hold all or part of this risk and pass on some or all of the risk to another reinsurer.

As usual, investopedia has a pretty good definition and explanation.

The practice of insurers transferring portions of risk portfolios to other parties by some form of agreement in order to reduce the likelihood of having to pay a large obligation resulting from an insurance claim. The intent of reinsurance is for an insurance company to reduce the risks associated with underwritten policies by spreading risks across alternative institutions.

Also known as “insurance for insurers” or “stop-loss insurance”.

Leave a Reply

Your email address will not be published. Required fields are marked *