A reinsurance company can be owned by any individual or entity other than the company being insured. Owners may include the owners of the company being insured, an asset protection trust, another corporation, limited liability companies, limited partnerships and other entities.
A reinsurance company needs an insurance license. The license is limited. It allows a reinsurance company to take on risks and premiums from a commercial casualty company pursuant to an insurance ceding agreement. A reinsurance company cannot issue an insurance policy directly to the public.
The cost of reinsurance varies greatly, and it is based upon both industry standards and the negotiating skills among the two companies involved, the insurance (or ceding) company and the reinsurance (or assuming) company. The cost of reinsurance is described as a “Ceding Fee” or “Ceding Allowance”, and consists of [...]
This depends upon the negotiations between the insurance company and the reinsurance company. Even though it might seem like the reinsurance company should take as little risk as possible, this would mean that the reinsurance company would get as little of the associated premiums as possible. If the reinsurance company [...]
Why should I consider forming a reinsurance company rather than a regular captive insurance company?
Creation of a regular captive insurance company is an expensive undertaking. Formation of a captive insurance company involves the work of attorneys, actuaries, underwriters and other professionals. Large non-deductible capital contributions are also required. Furthermore, the captive must satisfy “insurance” requirements, including risk pooling or risk sharing, and must qualify [...]
Reinsurance is the transfer of insurance risk (and associated insurance premiums) from one insurance company to another insurance company. The company that receives (or “assumes”) the insurance risk (and associated reinsurance premiums) is called the “Reinsurance Company” and the company that transfers (or “cedes”) the risk (and associated premium) is [...]