From the start, reinsurance — often referred to as "insurance for insurance companies" — has been a vital part of the insurance industry.
It broadens capacity and allows for more and varied risks to be covered. It can be funded traditionally but there are also alternate ways to ensure that funds for claims are available.
Reinsurance is critical to the insurance industry, as the reinsurers carry significant amounts of risk that regular carriers can't handle. It allows carriers to assume more risk knowing that there's layer above their policies to handle such things as catastrophes. That sounds straightforward enough, but in actuality it is a little more nuanced.
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