Reinsurance is insurance of insurance,

where one or further insurance companies agree to compensate the threat, incompletely or altogether, for the policy issued by another one or further insurance companies.

Reinsurance indicates the process where the original insurer accepted the threat from the original insured gets the threat covered by another insurer or reinsurer for the same reason the original insured got protection.

Before pacing to the study of reinsurance, the scholars must understand the meaning of certain languages generally used in the reinsurance business sale.

In the absence of similar understanding, the pupil is likely to get confused, and the study might mean obsolete to him.

What is Reinsurance or Reassurance?

This means insurance of insurance. The original insurer gets the threat, assumed from the original insured( primary insured), and covered( reinsured) with another insurer( known as reinsurer) for the same reason as the primary insured does.

The primary insurer, then, in fact, becomes the ensured( known as reinsured), and the person or body or company giving him the protection becomes the insurer( known as reinsurer).

Definition of Reinsurer or Reassurer

Meaning the person, body, or company giving reinsurance cover. They cover the insurer’s interest in case of loss/ damage of the property or subject matter ensured and for which the insurer is liable under the policy of insurance.

Definition of Reinsured / Reassured /Ceding Company / Direct Co-primary or original Insurer

All these terms relate to, indicate, or identify the insurer who primarily assumes the primary insured’s threat and also gets the same reinsured according to need.

When an insurer reinsures the threat, he becomes given as reinsured comforted ceding company/ direct company/ original or primary insurer.

What is Reciprocity?

This is a extensively habituated term in the sale of the reinsurance business, indicating a situation involving the desire for the satisfaction of collective interest.

typically, the direct insurers do distribute reinsurance business in addition to the insurance business at one time or the other.

When they cede reinsurance business as similar to another company, they also anticipate that at different times that company also would cede reinsurance business to them. This understanding of looking after each other’s interests is expressed by the term ’’ Reciprocity ”.

Astronomically, speaking reinsurance is insurance for insurance. This means that the original insurer( who firstly accepted the threat from the original insured) gets the threat covered with another( Reinsurer) for the same reason the original insured got protection for.

numerous pitfalls in nearly all business classes may be too big for an insurer to digest or bear on his own account.

The insurer’s fiscal strength on that account may not be potent enough to bear a loss if it at all takes place.

also, there's the question of big catastrophe losses, which might cripple down the insurer financially and force him to disown any liability to the ensured simply because of the incapability to recognize a claim.

Whilst this possibility is veritably much there, on the other hand, the ensured is also most reticent to go from insurer to insurer and to place only that quantum of business to each, as each would be suitable to bear.

It's indeed amidst these two axes that we see the development of a system wherein the ensured goes to one insurer which generally takes the whole threat and reinsures any balance beyond his retention capacity(i.e., beyond which he can not consume from the standpoint of fiscal strength for that class of business) with the reinsurers.


Reinsurance, like insurance in general, has the element of chance involved. The reinsurer hopes that his decorations will take care of his losses and that he'll gain a profit in the course of events.

When an insurer accepts threat for a huge quantum of one event, although he may be in a position to make a reasonable gain, yet indeed he has subordinated himself to serious possible arrears.

Under similar circumstances, he may ask to reinsure a part or all of the threat with some other company or insurer. Reinsurance way in as a system whereby the insurer may admit reprisal from his reinsurer in the event of reinsured’s liability to the original insured.

Some exemplifications may be considered at this stage.