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Reinsurance is a complex field of insurance business and takes many forms. Many general insurers are involved in selling reinsurance and there are specialist reinsurers. A contract of reinsurance is one where part of the risk accepted by the insurer is passed or ceded to another insurer (a reinsurer) under a contract between the original insurer and the reinsurer. »Ê¹ÚÌåÓýapp original insured is not a party to this contract of reinsurance.

»Ê¹ÚÌåÓýapp original insurer pays a premium to the reinsurer as consideration for reinsurance. »Ê¹ÚÌåÓýappre are different types of reinsurance, which are defined by how the risk and premium are ceded.

»Ê¹ÚÌåÓýapp exemption applies to all true reinsurance, whether facultative (accepted by the reinsurer on a case by case basis), or treaty (where there is an agreement that the reinsurer will accept all of the insurer’s risks in, say, a certain class of business).

A simple example of reinsurance might work as follows:

• Bloggs and Co. seeks insurance against fire, flood, or bomb damage to their office buildings and approaches insurer A for cover.
• Insurer A agrees to accept the risk and provide insurance.
• In turn, Insurer A might approach Insurer B and ask them to cover any claims for flood damage. Insurer B reinsures Insurer A against claims for flood damage made by Bloggs under their policy.

»Ê¹ÚÌåÓýapp contract that Bloggs has with Insurer A is completely separate from the contracts that Insurer A has with Insurer B.