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Reinsurance & Retrocession Insurance Glossary of Common Terms

If you haven’t gotten the idea already, insurance, reinsurance, and retrocession insurance are complex topics that can often be confusing to those who aren’t in the industry. Reading and understanding your policy can be challenging enough; understanding who is actually taking on risk and paying out your claim after property damage can be mind-blogging. Below, we’ve collected some of the more common reinsurance and retrocession insurance terms and tried to define them in an easy-to-understand way:

Capacity: The amount of exposure that an insurer is able to place at risk.

Ceding: The act of an insurance company or reinsurance company reinsuring with another reinsurance company.

Following the Fortunes: The clause in a reinsurance contract that states that the reinsurer is bound to share the same “fortune” as experienced by the ceding company in the event of a widespread catastrophe or other issue.

Loss Event: A single incident that affects a ceding company and reinsurer, such as a hurricane, tornado, or windstorm.

Retrocession Insurance: When a reinsurance company obtains reinsurance.

Spread Loss: A specific type of reinsurance in which insurance companies pay reinsurance companies premiums during low-claim years to build up a fund from which losses are recovered after loss events.

Stop Loss:  A specific type of reinsurance in which the reinsurance company pays the ceding company aggregate retained losses, subject to the policy limit, in excess of a certain amount or percentage.

Treaty: The agreement between an insurance company and reinsurance company that outlines the type of classes or businesses that the reinsurer is accepting.

Do you have a question about reinsurance or retrocession insurance? Are you concerned that your commercial insurance claim is not being handled properly or paid out correctly? You may wish to speak with a Texas commercial claims attorney. At the Voss Law Firm, we offer free, private consultations. Call today to schedule yours: 888-614-7730.

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The Voss Law Firm, P.C. represents clients on a local, national and international basis. We proudly serve companies and individuals along the Gulf Coast and around the globe on a contingency fee basis. Our law firm collects nothing unless we recover on our client's behalf.

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