Category: Reinsurance fundamentals · Reviewed by Tim Roche, Director · PI & Commercial · Last reviewed 2026-06-05
A retrocessionaire is the reinsurance carrier that accepts a cession of risk from a reinsurer under a retrocession contract. In short, the retrocessionaire is the reinsurer of the reinsurer.
Category: Reinsurance fundamentals Also known as: retro reinsurer, retro carrier Related concepts: retrocession, reinsurer Related legislation: Solvency II Directive 2009/138/EC; PRA Insurance Rulebook
The retrocessionaire occupies the same position relative to a retrocession contract as a reinsurer occupies relative to a reinsurance contract: it is the assuming party that, in consideration of a ceded premium, undertakes to indemnify the ceding reinsurer for losses falling within the scope of the contract. There is no direct contractual relationship between the retrocessionaire and the original insured, nor (ordinarily) between the retrocessionaire and the primary cedant.
The principal retrocessionaires in the global market are specialist retro writers, large reinsurers operating dedicated retro books, Bermuda-domiciled reinsurers, sidecar vehicles backed by alternative capital, hedge fund-backed reinsurers, and insurance-linked securities such as catastrophe bonds and collateralised reinsurance arrangements.
A retrocessionaire authorised in the United Kingdom is regulated by the PRA in the same manner as a reinsurer. Many retrocessionaires are domiciled in Bermuda, the Cayman Islands or other offshore jurisdictions with bespoke insurance regulation (Bermuda Monetary Authority; Cayman Islands Monetary Authority). For UK cedants the recognition of retrocession recoverables on the balance sheet of a UK reinsurer is governed by the PRA Insurance Rulebook’s rules on technical provisions and counterparty default risk.
ILS retrocession vehicles are typically incorporated as insurance special purpose vehicles (ISPVs). The PRA operates a fast-track authorisation regime for UK ISPVs (the ‘transformer’ regime) under the Risk Transformation Regulations 2017 [1].
The retrocessionaire is engaged by the reinsurer (or a reinsurance broker acting for the reinsurer) at renewal. The terms negotiated mirror those of reinsurance: scope of cover, retention, limit, reinstatement provisions, exclusions and collateral. Many retro programmes are heavily collateralised — particularly those backed by ILS capital — with funds held in trust or as letters of credit.
Retro capacity, particularly for property catastrophe risk, is among the most volatile in the global market. The retro market historically prices on a ‘rate on line’ basis (premium as a percentage of limit), with rate-on-line moving sharply in response to major loss events. The 2017–2018 hurricane and wildfire losses, for example, caused a significant withdrawal of retro capital and a rise in rates of 20–40 per cent at the 1 January 2018 renewals.
An illustrative example: a Bermudian reinsurer accepts £200m of property catastrophe risk and purchases a retrocession programme of £150m excess of £50m placed across an ILS catastrophe bond (£80m), a collateralised retro provider (£40m) and a Lloyd’s syndicate retro book (£30m). Following a major North Atlantic hurricane causing £125m of insured losses to the reinsurer, the retrocessionaires collectively pay £75m, leaving the reinsurer with a net retention of £50m.
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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