Reinsurance Agreement Template for the United States

A Reinsurance Agreement transfers part of an insurer's risk to a reinsurer in exchange for premium. In the United States its regulatory value depends on whether it supports credit for reinsurance under the applicable state law, and its commercial value depends on how precisely it interlocks with the underlying policies.

When do you need this document?

You need one when an insurer wants to write beyond its own appetite or capital, to protect results against a single large loss or an accumulation, or to support entry into a new class. Treaty cover suits a portfolio written automatically; facultative cover suits an individual risk the treaty cannot absorb.

What does it cover?

The agreement defines the business covered and the structure, whether a proportional share or a layer attaching above a retention, and sets premium, adjustments and exclusions. The provisions that decide recoveries are operational: whether the reinsurer follows the cedent's fortunes and settlements, what claims cooperation applies, and how losses aggregate into an occurrence, which determines how many retentions and limits apply. It also covers reports, records access, offset, the insolvency clause, any collateral or funds withheld arrangement, and arbitration.

Common pitfalls

The classic failure is a gap between the reinsurance and the underlying policies, so the cedent pays a claim its own wording covers but the reinsurance excludes. Back to back drafting is the only cure. The second is aggregation: an occurrence definition that does not match how losses actually arrive can multiply retentions, and on a catastrophe it is usually the largest number in dispute. The third is omitting or weakening the insolvency clause, which can undermine credit for reinsurance and therefore the capital benefit the cedent bought the cover for.