Category: Reinsurance fundamentals · Reviewed by Simon Temme, Account Executive · Last reviewed 2026-06-05
A reinsurer is the insurance undertaking that accepts a cession of risk from a cedant (the ceding insurer) under a reinsurance contract, in return for payment of a ceded premium. The reinsurer undertakes to indemnify the cedant for losses that fall within the scope of the reinsurance contract, but has no direct contractual relationship with the original insured.
Category: Reinsurance fundamentals Also known as: reinsurance carrier, assuming insurer Related concepts: cedant, reinsurance, retrocessionaire Related legislation: Solvency II Directive 2009/138/EC; PRA Insurance Rulebook; FSMA 2000
The reinsurer is a regulated insurance undertaking authorised to carry on reinsurance business. In the United Kingdom that authorisation is granted by the Prudential Regulation Authority under the Financial Services and Markets Act 2000 [1]. Globally, the reinsurance market is dominated by a small number of large carriers — Munich Re, Swiss Re, Hannover Re, SCOR and Berkshire Hathaway / General Re — together with the Lloyd’s market, Bermuda-domiciled reinsurers (such as RenaissanceRe and Everest Re), and a long tail of regional and specialty carriers.
A ‘pure’ reinsurer writes only reinsurance business. A ‘composite’ insurer writes both primary insurance and reinsurance — most large European insurers (Allianz, AXA, Zurich, Aviva) carry on both lines, often through dedicated reinsurance subsidiaries. A reinsurer that itself purchases retrocession is, in respect of that contract, a cedant.
Reinsurance is a regulated activity under the FSMA 2000 (Regulated Activities) Order 2001. A reinsurer carrying on business in the United Kingdom must be authorised by the PRA and regulated by the PRA and FCA, or must rely on a passporting right (where available) or a temporary permissions regime. Following the United Kingdom’s withdrawal from the European Union, EU-based reinsurers no longer have automatic passporting rights, although certain equivalence and run-off arrangements apply.
Solvency II (Directive 2009/138/EC) applies the same prudential regime to reinsurers as to direct insurers: the Solvency Capital Requirement, the Minimum Capital Requirement, the Own Risk and Solvency Assessment and the system of governance under Pillar 2 [2]. Lloyd’s syndicates are subject to the Solvency II regime collectively through the Society of Lloyd’s, with Funds at Lloyd’s providing the capital backing.
Reinsurers are typically rated by AM Best, Standard & Poor’s, Moody’s and Fitch. Cedants, regulators and reinsurance brokers rely on these ratings to assess counterparty credit risk and to allow for reinsurance recoverables in solvency calculations.
In practice the reinsurer’s underwriting team assesses each submission on its merits, applies underwriting guidelines (territory, line of business, retention, exclusion of nuclear, war, terrorism and other systemic perils) and either declines, modifies or accepts the cession. In treaty reinsurance the reinsurer subscribes to a line on the slip; in facultative reinsurance the reinsurer accepts an individual risk.
The reinsurer’s relationship with the cedant is governed by the principles of utmost good faith and ‘follow the settlements’. The reinsurer accepts that the cedant will, in the ordinary course, settle claims under the underlying business on a bona fide and businesslike basis, and the reinsurer will follow those settlements unless they are outside the cover or manifestly unreasonable [3]. The reinsurer’s rights of association, inspection and (under claims control clauses) claims conduct provide a measure of governance over claim settlement.
The reinsurer’s financial obligations to the cedant may be secured by collateral — see collateralised reinsurance, trust accounts, letters of credit and funds withheld. Collateral is particularly common for unrated or non-admitted reinsurers.
An illustrative example: a UK insurer’s property catastrophe XL programme is placed 100 per cent in the London market across ten layers. Munich Re leads the first layer with a 20 per cent line; the remainder is subscribed by Swiss Re, Hannover Re, Lloyd’s syndicates and other reinsurers. Each reinsurer is a separate carrier with a separate contractual obligation to the cedant, severally and not jointly; the cedant must therefore monitor the credit of each reinsurer and provide for any expected default in its IFRS 17 reinsurance asset.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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