What is a reinsurance agreement?

A reinsurance agreement is a contract between two insurance companies in which one company, the reinsurer, agrees to accept some or all of the risk associated with the policies it has issued and the other company, the insurer, agrees to accept the risk of any losses incurred. This type of contract helps to spread out financial risk when one insurance company may not have enough money to cover the full value of a policy claim. In Washington state, the Office of the Insurance Commissioner is responsible for regulating reinsurance agreements. Companies looking to enter into such an agreement must file their application with the Insurance Commissioner and show proof of financial soundness. In addition, the Commissioner has the power to reject or renegotiate the terms of a reinsurance agreement if there is evidence that it would be detrimental to the policyholders or to the public. Reinsurance agreements are beneficial for both insurance companies and policyholders. Policyholders benefit by having a greater chance of having their claims paid if their own insurance company does not have enough money to cover the full value of the claim. Insurance companies benefit by spreading the risk of financial losses when one company may not have enough money to cover a claim.

Related FAQs

How do I dispute an insurance claim decision?
What is a claim for bad faith?
What is a market value settlement?
What steps are involved in the insurance claim process?
What is an independent adjuster?
What types of insurance claims are there?
What are the time limits for filing an insurance claim?
What is an assignment of benefits?
What is a retroactive date in an insurance policy?
What is a settlement offer in an insurance claim?

What is a reinsurance agreement?

Related FAQs

Related Blog Posts