Reinsurance Sidecar


DEFINITION of 'Reinsurance Sidecar'

A limited purpose company created to work in tandem with insurance companies. Reinsurance sidecars will purchase a portion or all of an insurance policy from an insurance company to share in the profits and risks. If the underwritten policies have low claim rates while in possession of the sidecar, the investors will make higher returns.

BREAKING DOWN 'Reinsurance Sidecar'

Sidecars are used as a way to increase the original underwriter's business while reducing liabilities. The reinsuring company sometimes sets up a type of insurance investment vehicle, called sidecars, for investors who lack underwriting experience. The investors' funds are used by the reinsuring company to underwrite a portion or all of an existing policy from a separate company for a percentage of the premiums.

  1. Assumption Endorsement

    A supplemental insurance policy stipulating that, should the ...
  2. Cedent

    A party to an insurance contract who passes financial obligation ...
  3. Insurance Claim

    A formal request to an insurance company asking for a payment ...
  4. Premium

    1. The total cost of an option. 2. The difference between the ...
  5. Reinsurance

    The practice of insurers transferring portions of risk portfolios ...
  6. Insurance

    A contract (policy) in which an individual or entity receives ...
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