ARe cheat sheet

Reinsurance is insurance for insurers: the ceding company transfers part of its risk to a reinsurer in exchange for a premium.

The cedent is the customer; the reinsurer's service standard is measured by claims responsiveness, capacity availability, and technical support to underwriting.

Retention is the amount of risk the cedent keeps net; the reinsurer covers loss above that retention per the agreement.

Brokers intermediate most reinsurance placements; they owe duties to the client while transmitting risk data and negotiating terms.

Utmost good faith (uberrimae fidei) governs disclosure: the cedent must present all material facts affecting the risk.

Customer segmentation in reinsurance runs by cedent type (mutual, stock, captive, MGA) and by line of business served.

Value-added services include pricing models, catastrophe modeling, claims audits, and training for cedent underwriters.

Service failures typically stem from delayed claim payments, disputed treaty wording, and unclear communication during renewals.

Proportional treaties: quota share (fixed percentage of premium and loss shared) and surplus share (shares vary by line size above a retention line).

Non-proportional treaties: per-risk excess of loss, per-occurrence excess of loss, aggregate excess of loss, and stop loss.

Excess of loss attachment point and limit define coverage; the reinsurer pays losses above attachment up to the limit.

Facultative reinsurance covers a single risk or policy and is arranged case by case; treaty reinsurance covers a defined portfolio automatically.

Retrocession is reinsurance purchased by a reinsurer to protect its own assumed book.

Common clauses: reinsurance limits, exclusions, reinstatement provisions, and loss occurrence definitions.

Reinstatement provisions allow the cedent to restore exhausted limits, usually for an additional pro rata premium.

Treaty negotiation covers scope, retention, limits, pricing, terms, and exclusions; final wording is documented in the treaty slip.

The slip is the binding summary of terms; the full treaty wording follows and must conform to the slip.

Key clauses: preamble, reinsurance clause, exclusions, definitions, claims cooperation, and arbitration/governing law.

Premium is usually stated as a rate on subject premium; deposit premiums are reconciled via adjustment or experience-rated provisions.

Ceding commission compensates the cedent for acquisition and administrative costs; it affects net reinsurance cost.

Execution requires signed treaty, payment terms, bordereau reporting, and claims notification procedures.

Arbitration clauses specify seat, number of arbitrators, and applicable rules to resolve disputes without litigation.

Catastrophe accumulation: reinsurers must aggregate exposure across treaties and lines using modeled event scenarios.

Credit risk arises when a reinsurer cannot pay; cedents mitigate via collateral, trust funds, or letters of credit.

Regulatory and solvency requirements (e.g., risk-based capital) influence how much reinsurance a cedent must buy.

Data quality and reporting accuracy are persistent operational challenges; bordereaux must reconcile to financials.

Claims disputes often involve late notice, coverage interpretation, and proof of loss documentation.

Pricing cycle volatility: soft markets compress rates and widen terms; hard markets tighten capacity and pricing.

Operational resilience includes business continuity planning for underwriting, claims, and reinsurance administration systems.