What is co-insurance in reinsurance?

Co-insurance names two different splits, and operators lose recoveries when they use one word for both. On the original policy, coinsurance often means the insured retains a percentage of every loss. On a reinsurance slip, co-insurance usually means several markets each writing a line on the same placement. Quota share is a treaty share, not slip co-insurance. Say which split you mean on the file.

Facultative reinsurance packs in London still show following lines on one slip. The broker's job is one pack version, not three SOVs. Broker operations fail when each market is sent a different warehouse list.

Original coinsurance

Fictional walkthrough: ACME Construction Ltd, acme.example. The original property policy is USD 10,000,000 any one occurrence with 80 percent coinsurance (ACME bears 20 percent of each loss). A ground-up damage figure of USD 5,000,000 therefore leaves USD 4,000,000 to the insurers and USD 1,000,000 with ACME, before deductibles, if that is how the policy applies. Reinsurance sitting on that original must say whether the USD 10,000,000 on Slip.pdf page 2 is 100 percent or the insurers' 80 percent. If the facultative layer is USD 10,000,000 excess of USD 5,000,000 on 100 percent, and the claims bordereau reports only the insurers' 80 percent, attachment tests are wrong.

Extract the coinsurance clause from the original wording excerpt in the pack. If it is missing, it is a chase item. Do not assume 100 percent because construction risks "usually are."

Several reinsurers, one slip

Separately, three markets write 25 percent, 15 percent, and 10 percent of the ACME facultative layer of USD 10,000,000. Each pays its share of a covered loss. Each receives its share of premium. That is co-reinsurance, or following markets, or lines on a slip. It is not a 50 percent quota-share treaty. There is no automatic cession of the class. There is a written line.

If one following market is insolvent, the others do not silently pick up that 10 percent unless the slip says so — and it usually does not. Cedent credit-risk administration is a different file from ACME's TIV conflict (USD 42,000,000 slip versus USD 47,100,000 SOV). Do not hide a missing line by grossing the others up in the claims system.

Certificate shares must sum to the written lines. 25 + 15 + 10 is 50 percent. If the certificate prints 60 percent because someone added a 10 percent order that was never written, the extra 10 percent is a conflict, not capacity.

What not to flatten

Do not apply original 20 percent coinsurance as if it were a reinsurance share. Do not apply slip lines as if they were quota-share bordereau percentages on the rest of the book. Do not net a co-insurer's 15 percent against a treaty recovery on the same ACME loss without naming both contracts.

Lead versus follow still needs the same pack. If the leader saw SOV v3 with the extra warehouse and a follower still has v2, you have two TIV figures in the market. That is a placing failure, not a coinsurance feature. Keep one version. Chase the rest.