Reinsurance is a contract under which one insurer (the reinsurer) agrees to indemnify another insurer (the cedant) against all or part of the losses it may incur under policies it has issued. In exchange, the cedant pays a reinsurance premium. The chain of risk transfer runs from the policyholder up to the global market.
The reinsurance value chain: policyholder, cedant, reinsurer, retrocessionaire.
Why insurers buy reinsurance
Capacity, write larger risks than the cedant could safely retain.
Stability, smooth results by transferring the volatility of large or catastrophic losses.
Capital efficiency, release capital and improve solvency ratios.
Catastrophe protection, cap the impact of a single accumulating event.
A first formula: net retained loss
At its simplest, reinsurance splits every loss \\(X\\) into a retained part and a ceded part. If the reinsurance recovery is \\(R(X)\\), the cedant keeps the net loss:
Net retained loss
$$X_{\text{net}} = X - R(X)$$
The form of R(X) is what distinguishes proportional from non-proportional reinsurance.
From the reinsurer’s side the business is assumed (active) reinsurance; from the cedant’s side it is ceded (passive) reinsurance. Power Re sits on the assuming side, taking risk from cedants across the region.
Let’s build resilient portfolios together
Partner with a reinsurer that combines technical discipline, financial strength and deep regional insight.
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