Legal Definitions - coinsurer

A coinsurer is an insurance company that shares the financial responsibility for a loss covered by an insurance policy with one or more other insurance companies. Instead of a single insurer covering the entire risk, multiple coinsurers agree to pay a predetermined portion of any covered claim.

Here are some examples to illustrate this concept:

• Example 1: Commercial Property Insurance

  Imagine a massive manufacturing plant valued at $300 million. The risk of a catastrophic event, like a fire or natural disaster, is very high. To spread this significant risk, the plant owner might secure an insurance policy where three different insurance companies act as coinsurers. Insurer A agrees to cover 50% of any covered loss, Insurer B covers 30%, and Insurer C covers 20%. If a fire causes $50 million in damage, Insurer A would pay $25 million, Insurer B would pay $15 million, and Insurer C would pay $10 million. In this scenario, Insurers A, B, and C are all coinsurers because they collectively share the financial burden of the single loss under the same policy.

• Example 2: Specialized Liability Coverage

  Consider a major international sporting event, such as the Olympics, which requires an extremely large liability insurance policy, perhaps for $500 million, to cover potential lawsuits from accidents or injuries. No single insurance company might be willing or able to take on such a massive risk alone. Therefore, a consortium of insurers might come together. Insurer X might cover 40% of the liability, Insurer Y 35%, and Insurer Z 25%. If a spectator sues and wins a $100 million judgment, Insurer X, Y, and Z would each pay their respective percentage. Here, Insurer X, Y, and Z are coinsurers, sharing the financial risk and responsibility for potential liability claims arising from the event.

• Example 3: Marine Cargo Insurance for High-Value Shipments

  A company is shipping a unique collection of antique artifacts valued at $120 million across the ocean. Given the high value and potential risks of maritime transport, the company obtains a marine cargo insurance policy. Two insurance companies agree to underwrite this policy: Insurer Alpha takes on 70% of the risk, and Insurer Beta takes on 30%. If a storm damages the cargo, resulting in a $10 million loss, Insurer Alpha would pay $7 million, and Insurer Beta would pay $3 million. Both Insurer Alpha and Insurer Beta are coinsurers because they are jointly sharing the financial responsibility for any covered damage to the antique collection under the same insurance policy.