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Simple English definitions for legal terms
reinsured
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A quick definition of reinsured:
Term: Reinsured
Definition: Reinsured is an insurance company that transfers some or all of the risks it has underwritten to another insurance company, called a reinsurer. The reinsurer usually receives a percentage of the original premium paid by the policyholder. Another term for reinsured is cedent or cedant.
A more thorough explanation:
Definition: A reinsured is an insurance company that transfers all or part of the risk it has underwritten to another insurance company, usually along with a percentage of the original premium. This is also known as a cedent or cedant.
Example: ABC Insurance Company underwrites a policy for a large construction project. However, ABC Insurance Company does not want to bear the entire risk of the policy, so it transfers a portion of the risk to XYZ Reinsurance Company. XYZ Reinsurance Company agrees to take on a portion of the risk and pays ABC Insurance Company a percentage of the original premium.
Explanation: In this example, ABC Insurance Company is the reinsured or cedent because it is transferring a portion of the risk it has underwritten to XYZ Reinsurance Company. XYZ Reinsurance Company is the reinsurer because it is taking on a portion of the risk and paying a percentage of the original premium to ABC Insurance Company.