🤝 Reinsurance: Insurance for Insurance Companies
Reinsurance is the practice where one insurance company, known as the ceding company or cedent, transfers a portion of the risks and associated liabilities it has underwritten to another insurance company, known as the reinsurer.
In essence, it is insurance for insurance companies. The primary insurer pays a premium to the reinsurer, and in return, the reinsurer agrees to indemnify (reimburse) the primary insurer for a portion of the claims paid out, according to the terms of the reinsurance contract.
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