Reinsurance allows primary insurance carriers to underwrite risks beyond their balance sheet capacity by transferring tail liability to global reinsurers.
1. Reinsurance Mechanisms
- Treaty Reinsurance: Automatic blanket cession of all policies meeting defined underwriting criteria (e.g., 50% Quota Share).
- Facultative Reinsurance: Negotiating coverage for individual high-value risks on a case-by-case basis (e.g., a $200M skyscraper).
- Risk-Based Capital (RBC): Ensuring statutory surplus meets NAIC regulatory solvency thresholds during peak catastrophe seasons.