Reinsurance

The reinsurer, being liable to pay its share of all losses, is entitled to a like share of any amounts recovered as salvage. The ceding company has the control of all loss settlements and may settle a loss or contest a claim as it thinks fit. The reinsurer is bound to follow the fortunes of the ceding company in this matter.

Disputes arising between the parties to a reinsurance treaty, as to any matter coming thereunder, are almost invariably settled by arbitration.

Bordereaux.

Particulars of cessions made under a treaty are advised by the ceding company to the reinsurer by means of bordereaux. A bordereau is a statement giving the name and address of the insured, the nature of the risk, the sum insured, the premium, the amount reinsured and the reinsurance premium. No reinsurance policies are issued under treaties, as the rein surance cover operates under the treaty contract. In marine business, however, properly stamped policies have to be issued even for reinsurance, under the provisions of the Stamp Act, 1891, and the Marine Insurance Act, 1906.

Retrocession.

A reinsurer, receiving particulars of its ces sions by bordereaux, will itself deal with the business so received, and will in its turn arrange treaties to cede off its own surplus lines. A reinsurance of a reinsurance is called a retrocession. Retrocession is an important part of reinsurance business because where a reinsurer has a share of many treaties it will frequently receive a share of the same risk under many of its different treaties and must needs relieve itself by retrocession of the accumulation of risk. (C. E. G.)

United States.—The American reinsurance business has grown by leaps and bounds in the last two decades. For instance, ac cording to the New York State Insurance reports on casualty insurance the ratio of reinsurance premiums to net premiums was 3.5% in 1915, while in 1925 the ratio was 8.3 per cent. As in the European countries Facultative and the three kinds of Treaty insurance are used, but the percentage of Facultative is rapidly diminishing because of delay and uncertainty.

What may be called a variation of the Fixed Treaty is the "Pool" or "Syndicate." Here as many as thirty-five companies will enter into an agreement to share all insurance in a given territory on a basis of certain agreed proportions both as regards premiums and losses. In order to facilitate the placing of re insurance and to bring about greater uniformity of practice, re insurance "Clearing Houses" or "Exchanges" have been estab lished. Here the detailed reinsurance agreement is subscribed to by the member companies who are all represented by a man ager. Many of the life insurance companies still use the Faculta tive plan of reinsurance. There are two ways of reinsuring. The smaller companies will reinsure the amount at risk with term insurance. Most of the larger companies use the "Coinsurance" plan, whereby the reinsurance company receives a proportionate part of the premium and guarantees a proportionate part of all payments including expenses and taxes. There are to-day many companies whose business is entirely reinsurance. (R. RET.)