Reinsurance answers

Reinsurance is insurance for insurance companies. It allows primary insurers (cedents) to transfer portions of their risk portfolios to reinsurers in exchange for premium, helping them manage capacity, stabilize results, and protect against catastrophic losses.

The cedent is the insurer that transfers risk. The reinsurer accepts that risk for premium. The same company can be both in different contracts, which is why reporting packs have to name the role, not just the legal entity.

Bordereaux are detailed periodic reports that cedents provide to reinsurers, listing all policies, premiums, claims, and exposures covered under a reinsurance treaty. They are essential for treaty accounting and reconciliation between cedent and reinsurer systems.

Bordereaux reconciliation compares cedent-reported premium and loss data against treaty terms, reinsurer records, and accounting systems to identify discrepancies, validate accuracy, and ensure both parties' records align.

Premium bordereaux list policies written and premium ceded in a period. Claims bordereaux list losses, payments, and reserves. Both should reconcile to treaty terms, currency, and reporting year, but they answer different accounting questions.

Treaty reinsurance is an automatic agreement where the reinsurer agrees to accept all risks of a specified type from the cedent that meet predefined criteria. Common types include quota share, surplus, and excess of loss treaties providing ongoing capacity.

Facultative reinsurance is individually negotiated coverage where both cedent and reinsurer evaluate each risk separately. It provides flexible capacity for large, unusual, or complex exposures that don't fit under treaty agreements.

A facultative certificate is proof of facultative reinsurance placement confirming the reinsurer has accepted a specific risk. It specifies terms, coverage limits, conditions, and conditions precedent for the individual placement.

A facultative slip is an informal preliminary agreement documenting reinsurer's conditional agreement to cover a facultative placement. Once signed by reinsurers, slip lines aggregate toward the full limit; formal certificate finalizes coverage.

Treaty covers a defined class of risks automatically once the risk fits the wording. Facultative is placed risk by risk. Treaty is a portfolio contract. Facultative is a submission, quote, and certificate.

A chase list is the ordered set of missing pages, stale schedules, unsigned slips, and unresolved slip-versus-SOV conflicts that block a quote. It is the work queue, not a narrative summary of the file.

AI automates reinsurance through document extraction, bordereaux reconciliation, treaty pricing analysis, submission processing, and portfolio monitoring. Specialized AI agents eliminate manual data entry, reduce errors, and accelerate workflows materially.

Reinsure-8B is Reinsured.AI's insurance-native small language model for reinsurance documents and workflows. It can be called via API or deployed in a customer environment. It is a model, not a full operations system by itself.

CAT XOL (Catastrophe Excess of Loss) is reinsurance protecting against accumulations of losses from a single catastrophic event like hurricanes or earthquakes. Coverage applies once aggregate losses from an event exceed the attachment point.

Lloyd's of London is the world's leading specialist insurance and reinsurance marketplace where members (syndicates) accept risk from brokers. Known for complex, large, and unusual risks, Lloyd's has operated since 1688.

Insurance brokers are intermediaries who represent cedents in reinsurance placements. They package business, obtain underwriter commitments, and facilitate all communication between cedents and reinsurers throughout the contract period.

Quota share is proportional reinsurance where the cedent cedes a fixed percentage of all premiums and losses to the reinsurer. For example, in a 30% quota share, the reinsurer receives 30% of premiums and pays 30% of all losses.

A ceding commission is a percentage of premiums that reinsurers pay back to cedents in proportional reinsurance treaties. It reimburses cedents for acquisition costs and overhead, typically ranging from 5-35% depending on treaty profitability.

Surplus reinsurance is proportional coverage where cedents cede all premium and loss above a retention line. The reinsurer participates in only the amount above cedent's 'line' up to agreed limits, creating variable participation by risk size.

Reinsurance pricing combines actuarial analysis of historical loss ratios, exposure assessment, catastrophe modeling, market conditions, and risk-adjusted return requirements. Key metrics include rate on line, loss cost, and expected return period.

Rate on line is the ratio of reinsurance premium to coverage limit, expressed as a percentage. It's a key metric for comparing reinsurance pricing - a 5% rate on line means the cedent pays 5% of the limit as annual premium.

An exposure base is the metric used to calculate reinsurance premium in non-proportional treaties. Common bases include earned premium, number of policies, or sum insured, with reinsurance premium calculated as: Exposure Base × Rate on Line.

Loss ratio is the percentage of premium paid out in losses. For example, 65% loss ratio means the cedent/reinsurer paid $0.65 in losses for every dollar of premium received. Higher loss ratios indicate less profitable business.

Retrocession is reinsurance purchased by reinsurers to transfer their own risk to other reinsurers (retrocessionaires). This allows reinsurers to manage capital, reduce volatility, and protect against large loss accumulations.

Claims-made coverage responds when losses are reported to the reinsurer, regardless of when they occurred. This differs from occurrence coverage which responds based on when the event happened, not when the claim was reported.

Common reinsurance disputes arise from differing loss interpretations, policy wording ambiguities, coverage exclusions, causation questions, and reservation of rights. Most disputes involve cedent vs. reinsurer disagreements over specific claim coverage.

Reinsurers manage cat risk through catastrophe modeling, diversification across geographies and perils, CAT XOL and facultative reinsurance purchases, capital markets solutions like CAT bonds, and strategic underwriting guidelines.

Quota share is proportional reinsurance sharing premiums and losses at a fixed percentage. Excess of loss is non-proportional, responding only when individual or aggregate losses exceed an attachment point, regardless of premium volume.

Underwriting guidance comprises guidelines that reinsurers establish to manage risk exposure. These specify acceptable business types, geographic limits, peril exclusions, accumulation caps, and cedent requirements to control portfolio composition.

Parametric insurance triggers payouts based on measured parameters (wind speed, rainfall, earthquake magnitude) rather than actual losses. This provides faster payouts but requires accepting basis risk (mismatch between parameter and actual losses).

An attachment point (or deductible) is the loss threshold above which reinsurance coverage begins. For example, a $5M attachment point means the reinsurer responds only to losses exceeding $5M retained by the cedent.

An aggregate limit is the maximum total amount a reinsurer will pay for all losses during a treaty period. Once aggregate losses reach the limit, the reinsurer has no further obligation even if additional losses occur.

A reinstatement clause allows cedents to restore treaty coverage after losses exhaust limits. For example, a treaty might offer '2 free reinstatements' where aggregate limits restore automatically after major events, or paid reinstatements where cedents pay premium to restore capacity.

IBNR (Incurred But Not Reported) represents estimated losses that have occurred but have not yet been reported to the cedent or reinsurer. IBNR reserves must be established to cover eventual claim reporting and provide financial stability.

Premium financing allows cedents to pay reinsurance premiums over time rather than upfront. Cedents pay installments monthly or quarterly with interest, improving cash flow but increasing overall reinsurance cost.

Co-insurance occurs when multiple reinsurers accept shares of the same coverage, each contributing a percentage of the limit and receiving the corresponding percentage of premium and losses. It's common in facultative and large treaty placements.

October 1st is the traditional reinsurance market renewal date when most property treaties expire and renew. Hard market conditions in 2001-2002 established this date; before then most renewals occurred January 1st.

The underwriting cycle is the cyclical pattern of reinsurance profitability alternating between 'hard markets' (high rates, strict terms, reduced competition) and 'soft markets' (low rates, loose terms, intense competition).

Insurance AI is software that reads insurance documents and data into structured fields a human can act on. It is not a general chatbot. The useful kind is scoped to a workflow: submissions, claims, pricing support, or reporting.

ChatGPT is a general language model. Insurance AI, as used here, is workflow software: field extraction, validation against a pack, and an audit trail. You can wrap a general model in a product, but the product still has to refuse unsourced numbers.

Intelligent document processing (IDP) classifies files and pulls fields from known templates. It is useful for high-volume, stable layouts. Reinsurance packs are not stable: slips, SOVs, and wordings vary by broker and year.

No. It can triage submissions, extract fields, and flag conflicts so underwriters spend time on appetite and price. Replacing judgement with an unsourced model output is how you get quietly wrong limits.

Source-grounded extraction ties every emitted field to a document, page, and character span. If the span is missing, the field is a gap, not a guess. That is the difference between a pack and a hallucination.

Ungrounded models will invent clauses, limits, and named insureds when the PDF is unclear. A production system should refuse to fill those fields and list them as gaps instead of sounding sure.

A read-only connector copies submissions from a mailbox you grant, then you can revoke it. The marketing site does not take live client packs. Production ingest is tenant-scoped and reversible.