Reinsurance

Reinsurance by Strain, Robert W.. Hardcover edition. ISBN: 9780939727001.

Excerpt from preface: The purpose of reinsurance begins with the desire and ability to insure with others part or all of what one has already insured. The object may be one essentially of sharing risk, and this objective is how rein-surance first began. The reinsurance of part or all of a risk insured under a single policy is called facultative, or specific reinsurance. In keeping with this object of sharing, all reinsurance was orginally arranged on a proportional (or "pro rata") basis. An agreed percentage of a policy (and loss falling to it) was reinsured in return for the same percentage of the original premium (the "reinsurance" premium). Ordinarily, the reinsurer reimbursed the insurer for its allocable cost of acquiring and producing the policy by allowing a "ceding commission" appropriate to that cost or expense, expressed as the percentage of the reinsurance premium. Ceding commissions remain a frequent characteristic, an almost universal one with proportional reinsurance. In