InsuranceFinancial Glossary
Reinsurance
Definition
Insurance purchased by an insurance company from another insurer to reduce its own risk. The primary insurer (called the cedent) transfers a portion of its risk to the reinsurer in exchange for a portion of the premium. GIC Re (General Insurance Corporation of India) is India's sole domestic reinsurer.
Why It Matters
Reinsurance is why your insurer can afford to issue a Rs 1 crore health insurance policy — the insurer does not bear the entire risk alone. Strong reinsurance backing makes an insurer more financially stable and better able to honour large claims. The strength of an insurer's reinsurance arrangement is a sign of reliability.