Voluntary reinsurance operations allow the divested entity to offer a reinsurer an individual risk or a defined set of risks. The reinsurer reserves the right to accept or refuse the risk, just as the insurer has the right to decide to insure an insurance taker. Under an optional agreement, the reinsurer makes its own subcontracting for some or all of the policies to be insured, and each policy is considered a single transaction. As with insurance contracts, reinsurance execution is often carried out by an intermediary broker, the “investment broker.” Unlike other forms of insurance, it is customary for a reinsurance broker to place the divested risk and the corresponding reinsurance. The former can be described as “internal” or “ceded risk” and the latter “outward-looking” policy. For the broker, it is therefore imperative to take into account at all times for whom he acts. In the case of an excess contract, the reinsurer agrees to pay the total amount of losses or a certain percentage of losses above a certain ceiling up to the ceding. Excess reinsurance-loss ends less than standard insurance, as are contractual and optional reinsurances, with the cedent and reinsurer often requiring participation in losses. Reinsurance is insurance. It is a way to transfer or “transfer” some of the financial risk that insurance companies take in insurance for cars, homes and businesses to another insurance company, the reinsurer.
Reinsurance is a very complex global activity. In 2010, according to the American Reinsurance Association, about 7% of total premiums were set up by the U.S. property and casualty insurance industry (companies created specifically for reinsurance). The reinsurer`s liability generally covers the entire life of the original insurance once it is written. However, the question arises as to when one of the parties will be able to cease reinsurance for future new transactions. Reinsurance contracts can be written either on an ongoing or “term” basis. A permanent contract does not have a predetermined deadline, but as a general rule, each party can terminate 90 days or change the contract for new transactions. A due agreement has an integrated expiry date.
It is customary for insurers and reinsurers to maintain long-term relationships that span many years. Reinsurance contracts are generally longer documents than discretionary certificates, which contain many of their own conditions, which differ from the conditions of the direct insurance policies they reinsure. However, even most reinsurance contracts are relatively short documents, given the number and diversity of risks and divisions that re-insure contracts and transaction dollars. They are highly dependent on industry practice. There are no “standard” reinsurance contracts. However, many reinsurance contracts contain a number of frequently used provisions and provisions, which are complemented by a large common and practical sector community required.  A primary business`s reinsurance program can be very complex. Simply put, if represented, it could look like a pyramid with ascending dollar coverage levels for increasingly distant events, spread among a number of reinsurance companies that each take a portion. It would have proportional and surplus layers of loss contracts and possibly an optional surplus of the losing layer at the top. The disaster bond market, largely encouraged by reinsurers, has begun to change. In 2009, for the first time, direct insurers were sponsors of the majority bond issues – about 60 percent.
Industry observers say that primary companies are increasingly incorporating cat bonds into their core reinsurance programs to diversify and increase flexibility.