DEFINITION of 'Lead Reinsurer'

The reinsurer responsible for negotiating the terms and rates of a reinsurance treaty that other reinsurers participate in. The lead reinsurer, also known as the lead underwriter, is the first party to sign the reinsurance slip or contract.

BREAKING DOWN 'Lead Reinsurer'

Reinsurance contracts establish the relationship between the ceding insurer and the reinsurer, and outline the risks that the reinsurer will indemnify the ceding insurer on and the fee that the ceding insurer has to pay for coverage. The basic details of the contract are outlined on a “slip”, which tends to be shorter than a standard insurance contract because both parties are generally considered to be sophisticated.

It is not uncommon for multiple reinsurers to participate in a single reinsurance contract. They may join together in order to gain exposure to a particular risk without being responsible for indemnifying the insurer for the entire risk, or because the overall risk is too great for any one company. When this happens a lead insurer – typically the most sophisticated and experienced reinsurer – acts on behalf of the other reinsurers (called following reinsurers) in negotiating the terms and conditions of the contract. The lead reinsurer also tends to have the best reputation of the group of reinsurers, thus making it the most likely to be respected.

While lead reinsurers are responsible for negotiating the reinsurance treaty they are not required to take the largest share of the risk. They may be granted the authority to modify the reinsurance contract after it is signed, with any modifications considered binding on all other reinsurers.

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