Definition

A part of the policy that lists what is not covered by the insurance. It clarifies the limits of your protection and prevents misunderstandings.

What to consider

  • Understand how reinsurance spreads risk.
  • Know the terms and limits of reinsurance agreements.
  • Consider the impact on overall premium costs.

Real world scenarios

  • A large insurer transfers part of its risk to another company through reinsurance to manage potential large claims.
  • A property insurer uses reinsurance to mitigate the financial impact of natural disasters.
  • An insurer in the auto sector purchases reinsurance to balance its portfolio risks.

Related terms

Insurance & Financial Protection