Reinsurance Question

[suretybonding]

Hi,

Does anyone know what Reinsurance Cap Exception means?

[Surety Guy]

I'm not positive, but I will take an educated guess...

I would think that reinsurers have a cap as far as how much they cover, but I am sure there are exceptions to the cap.

Sound reasonable enough?

Anyone else have any thoughts on this?

[suretybonding]

Thanks.

More than likely, this is referring to the "underwriting authority" granted to the insurance company by the reinsurance treaty that is standard in all excess of loss reinsurance treaties. Simply, this means that any risk that exceeds this limit must be pre-approved by the reinsurance company prior to the surety comapny approving the risk. These limits are negotiated and customized for each company and can change over time.

[Surety Guy]

That is what I was trying to say, but you said it much better. Good post! Some of the underwriting restrictions that underwriters have are due to their reinsurance.

Reinsurance costs are tremendously high. I had a lunch meeting with one of our underwriters; he said they don't carry reinsurance, as the costs would take them from making a large profit to breaking even. This is of coarse is not common, most sureties pay the high reinsurance premiums.