This article was written with the assistance of AI and edited by Angela Sabarese.
In CLM’s latest webinar in its educational “Insurance 101” series, three insurance industry professionals—Tammy Wade, TransRe; Elizabeth Dollins, Swiss Re; and Alex Niederman, Amerisure Mutual Insurance Company—provided an in-depth exploration of reinsurance fundamentals for claims handlers and underwriters.
Reinsurance Defined
The presentation demystified reinsurance, which Wade succinctly defined as “insurance for insurance companies.” The experts explained how insurers purchase reinsurance to smooth out volatile years and protect against catastrophic losses that could otherwise lead to insolvency. Using the example of a tornado destroying hundreds of homes, Wade illustrated how reinsurance prevents primary insurers from bankruptcy when facing massive simultaneous claims.
Key themes included the critical distinction between proportional and non-proportional reinsurance structures, treaty versus facultative arrangements, and the concepts of retention and cession. Dollins emphasized that “retention refers to the amount of risk that the primary insurer keeps for its own account...it feels like a deductible for the insurance company before their reinsurance would come into play.”
Practical Applications
The presenters stressed practical applications for claims professionals. Niederman highlighted the importance of early consideration, noting that “reinsurance considerations should be part of your initial claim review” and warning that “you tend to see people get upset, you tend to see more bad faith litigation when people are surprised with bad news.”
The global reinsurance industry represents approximately $250 billion annually—about 10% of the total property and casualty market—with 152 reinsurers operating across 32 countries. Beyond financial protection, reinsurance provides insurers access to specialized expertise, helps manage rating agency requirements, and enables smaller insurers to compete for large risks they couldn't otherwise handle, according to the panel.
The webinar underscored that reinsurance is not merely a financial tool but a strategic necessity ensuring insurance markets remain stable and accessible to consumers, particularly in catastrophe-prone regions.
To see a replay of this CLM webinar and others, click here.