What Is Reinsurance? The Insurance for Insurers

Insurance companies need insurance too. Reinsurance spreads risk across multiple insurers. Understand how it works and why it matters for policyholders.

By Deep Shah, CEO, IndSure

What Is Reinsurance?

Insurance companies need insurance too. Reinsurance spreads their risk across multiple insurers.

How It Works

Your insurer sells policies, then buys reinsurance against large claims. An insurer holding ₹100cr in policies might reinsure ₹80cr with other companies. When a ₹50cr claim hits, the reinsurers pay their share.

Why It Matters to You

Reinsurance is how your insurer pays claims even after a massive disaster. You never deal with a reinsurer directly—but it protects you from insurer bankruptcy.

Reinsurance protects the system; it doesn't change your cover. Your protection is your own policy's wording—generic advice ends here, check what YOUR policy actually says.

Frequently asked questions

Do I interact with reinsurance as a customer?

No. Reinsurance is between insurance companies. As a policyholder, you deal only with your insurer. Reinsurance happens behind the scenes—but it protects you indirectly.

Why do insurers need reinsurance?

To spread risk. One ₹100cr claim could bankrupt a small insurer. Reinsurance spreads that risk across multiple companies, ensuring all claims get paid.