Glossary

Reinsurance

Insurance that an insurance company buys from other companies, which reimburse part of its claim payments, especially after a large disaster.

Also called: reinsurer, ceded insurance, cat reinsurance, treaty reinsurance, insurance for insurers

Reinsurance is insurance for insurers. A primary insurer, called the ceding company, pays a premium to one or more reinsurers, who agree to reimburse part of its losses. It lets a company write more policies than its own surplus could support and caps the damage from a single disaster.

There are two main forms. In proportional reinsurance, usually a quota share, the reinsurer takes a fixed percentage of every policy and the matching share of premium and losses. In excess-of-loss reinsurance, the reinsurer pays only after the insurer's losses pass an agreed retention, which is how most catastrophe protection works. The excess layers are stacked in a reinsurance tower. Contracts renew once a year. Many renew on January 1, while Florida programs typically renew on June 1, the start of hurricane season.

You never deal with the reinsurer. Your insurer adjusts and pays your claim, then collects from its reinsurers. Reinsurance still reaches you in two ways. Its cost is a major driver of homeowners rates in catastrophe states, and when it becomes expensive or scarce, insurers reduce the number of policies they write in exposed areas. An insurer with too little protection can also be left short after a big storm. See reinsurance: the insurers behind your insurer and reinsurance costs and your premium for the details.

Last reviewed October 10, 2026

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Related terms

Reinsurance tower The stack of reinsurance layers an insurer buys one above another, each starting where the layer below ends, to cover progressively larger catastrophe losses. Catastrophe bond A security sold to investors that pays interest, but whose principal goes to the insurer that sponsored it if a defined disaster occurs, serving as reinsurance. Probable maximum loss A modeled estimate of how big an insurer's loss from a single severe catastrophe could be, stated at a probability such as a 1-in-100-year event. Policyholder surplus An insurer's assets minus its liabilities under statutory accounting, the capital cushion that absorbs losses beyond its reserves and premiums. Direct premiums written The total premium on the policies an insurer issues itself in a period, counted when written and before any share is passed to reinsurers. Florida Hurricane Catastrophe Fund Florida's state-run reinsurance program, set up after Hurricane Andrew, that reimburses residential insurers for part of their hurricane losses.

Related guides

The California Earthquake Authority explained What the CEA is, how its policies are sold through your home insurer, what they cover and exclude, how it is funded, and what its limits mean for homeowners. California's home insurance crisis Why California homeowners lost coverage, how the FAIR Plan became a major insurer, and what to do if you are dropped. Facts as of October 2026. California's Sustainable Insurance Strategy What the Sustainable Insurance Strategy changes in California: wildfire models, reinsurance costs in rates, the 85% writing commitment and what you can expect. Catastrophe bonds and home insurance How cat bonds let investors, not just reinsurers, back hurricane and wildfire risk, who sponsors them, and what they change for homeowners and their premiums. How catastrophe models shape your premium Catastrophe models estimate yearly losses from hurricanes, wildfires and storms. How that output reaches your rate, who checks the models and what you can fix. Climate change and home insurance: what's changing How wildfire, storms, flooding and heat, plus more homes in harm's way and costlier repairs, feed into premiums, deductibles and availability.

Related insurers

Allied Trust Insurance Coastal homeowners insurer founded in 2015 and managed from Tampa that sells through independent agents in Louisiana, Texas, North Carolina and South Carolina. The Andover Companies Andover, Massachusetts insurer founded in 1828, sold only through independent agents in eight states; a mutual holding company since January 2026. Clear Blue Insurance Group Fronting carrier group launched in 2015 whose Rock Ridge Insurance Company issues the homeowners policies Openly sells through independent agents in 24 states. Cypress Property & Casualty Jacksonville, Demotech-rated insurer selling homeowners, condo and rental policies through agents in Florida and Texas, with a deductible installment plan. Farm Bureau Insurance (Southern Farm Bureau Casualty) Mississippi-based carrier owned by state Farm Bureaus that insures Farm Bureau members' homes in Mississippi, Arkansas, Colorado and Florida. Sutton National Insurance Delray Beach, Florida program carrier that issues policies for managing general agents, above all Bamboo's California homeowners program.