Reinsurance tutorials #25
What is a follower?
A follower is a reinsurance company that jointly signs a reinsurance treaty with other reinsurance companies, but is not the primary reinsurer that negotiated the terms of the agreement.
A following reinsurer is subject to the same terms as the reinsurer responsible for the negotiations, the lead reinsurer, and it may be a company that has less expertise than the lead reinsurer. Follower accepts the business ceded based on the terms and conditions of a contract primarily negotiated and agreed by lead reinsurer and the cedent. Follower reinsurers accept to participate in a reinsurance treaty in which the final terms and conditions have already been agreed, but they don’t necessarily influence the terms and conditions involved. There can be one or more followers participating in a reinsurance contract, depending on the risk or capacity to be placed.
Followers can be small reinsurance companies that may not otherwise be able to work with a ceding company because they cannot take on as much risk as the contract requires. They may also be less familiar with a particular type of risk, and thus less willing to take on a large amount of that risk until they get more expertise.
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