Retrocession insurance goes one step beyond reinsurance. When insurance companies need insurance themselves, they go to reinsurance companies. When reinsurance companies want to spread out the high risk of insuring an insurance company, they get retrocession insurance with other reinsurance companies.
More simply put, retrocession insurance spreads out the burden of liability after a large weather event or catastrophe. If a huge hurricane hits the Gulf Coast, an insurance company may have literally thousands of damage claims to pay out. Without reinsurance and retrocession insurance, it may not be able to pay out all of the money that it owes.
Retrocession insurance is overall a great way for insurance companies to offer insurance policies that cover large storms and other widely devastating events. However, the system isn’t perfect. Here are three complexities of retrocession insurance than you should know about if you are a policyholder:
- Spiraling. As you can see, reinsurance and retrocession insurance can become quite complex. When you add the fact that some insurance products are sold multiple times between reinsurance companies, sometimes the result is spiraling: the act of selling reinsurance to your own company. When disaster strikes, the reinsurance company may find that it simply cannot ask itself for money.
- Risk is still risk. Even with reinsurance and retrocession insurance, huge storms can still paralyze some insurance companies and they can struggle to pay out claims. In some cases, reinsurance companies can create a sense of false security. Even when insurance companies are insured, they can have difficulty paying claims to thousands of policyholders.
- Disagreements between companies. Why is your insurance claim being delayed? In some cases, you may be told that the reinsurance company disagrees with the actions of your insurance company. For example, the reinsurance company may believe that your insurance company is acting in bad faith.
As you can see, insurance claims can be complex, especially in the wake of a storm that affects a large number of policyholders. At the Voss Law Firm, we are dedicated to helping our clients get the money they deserve after property damage, despite insurance company issues. To learn more about how we can assist you, call today us today at 888-614-7730. We will be happy to schedule you a free, private meeting with a residential insurance claim attorney.
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