Retrocessie
Retrocession
Retrocession is the further reinsurance by a reinsurer of a risk previously accepted by it, placed with a third reinsurer. This distributes the risk along the chain of insurance.
Retrocession is a form of reinsurance whereby the primary reinsurer transfers a portion of the risk it has assumed to another reinsurer, known as the retrocessionaire. This mechanism is commonly employed in the reinsurance market to spread risks and limit the exposure of individual reinsurers.
It is significant in that it enhances the stability of the insurance market by distributing large risks—such as those arising from natural disasters or liability claims—across multiple parties. Absent retrocession, reinsurers would be more vulnerable to substantial claims.
In practice, retrocession arises in complex insurance arrangements, where the retrocessionaire may in turn retrocede the risk, thereby creating a chain of reinsurance.
“The reinsurer decided to proceed with retrocession in order to mitigate the risk of the large construction projects.”
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