DEFINITION of 'Assumption Endorsement'

A supplemental insurance policy stipulating that, should the original insurer become insolvent, any claim covered by the reinsurance will be paid directly to the policyholder by the reinsurer, rather than through the traditional channels. This is not intended to increase the risk to the reinsurer but, rather, to expedite the claims process. Also called a "cut-through endorsement."

BREAKING DOWN 'Assumption Endorsement'

The assumption, or cut-through, endorsement derives its name from the fact that it "cuts through" the proverbial "red tape" so often associated with insurance claims, providing prompt, hassle-free payments of claims.

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