Which insurance is governed by a reinsurance treaty

What Is Treaty Reinsurance? Treaty reinsurance is insurance purchased by an insurance company from another insurer. The company that issues the insurance is called the cedent, who passes on all the risks of a specific class of policies to the purchasing company, which is the reinsurer.

What type of insurance is reinsurance?

Issue: Reinsurance, often referred to as insurance for insurance companies, is a contract between a reinsurer and an insurer. In this contract, the insurance company—the cedent—transfers risk to the reinsurance company, and the latter assumes all or part of one or more insurance policies issued by the cedent.

What are examples of reinsurance?

For example, an insurance company might insure commercial property risks with policy limits up to $10 million, and then buy per risk reinsurance of $5 million in excess of $5 million. In this case a loss of $6 million on that policy will result in the recovery of $1 million from the reinsurer.

What are the two types of reinsurance in life insurance?

Types of Reinsurance\n\n Reinsurance can be divided into two basic categories: treaty and facultative. Treaties are agreements that cover broad groups of policies such as all of a primary insurer's auto business.

What is treaty in general insurance?

Treaty — an agreement between an insurer and a reinsurer stating the types or classes of businesses that the reinsurer will accept from the insurer.