What is Licensed For Reinsurance Only

Licensed for reinsurance only is a license that allows a company to engage in services related to reinsurance in the state that has granted the license. This means they are strictly limited to operating only within that particular role.

BREAKING DOWN Licensed For Reinsurance Only

Licensed for reinsurance only applies to reinsurance brokers who negotiate reinsurance cessions on behalf of a ceding insurer, as well as reinsurance managers who manage the reinsurance business of a reinsurer.

States may separate out the type of reinsurance company with which an insurer is able to work. For example, a state may require a company to work with licensed reinsurance intermediary brokers, or may require the insurer to work with licensed reinsurance managers. State regulations prevent an insurer from working with any person or company who is not licensed.

States may require a reinsurance manager to file a bond with the state insurance commissioner for each reinsurer the manager represents. This bond is used to protect the reinsurer. State insurance commissioners may also require the reinsurance manager or reinsurance broker to maintain a policy that covers potential financial problems or possible claims associated with errors and omissions.

Regulations and Licensed for Reinsurance Only

Insurance is a highly regulated field, with a vast range of laws, policies and industry guidelines that must be followed by professionals and businesses that operate or want to operate in that sector.

Insurance is predominantly regulated by states, as opposed to the federal government. For this reason, rules and regulations can vary quite a bit from one state to another. State insurance commissioners and regulatory bodies set the guidelines for insurance policies, provide licenses to insurance companies and brokers, and ensure that insurance companies are solvent. Like any other insurance companies or professionals, reinsurance intermediaries and reinsurance managers must comply with state provisions covering the regulation of insurance, as well as activities specifically related to reinsurance activities. A license granted to a firm authorizes all members of that firm to act as reinsurance intermediaries.

Insurance regulators may treat insurance companies differently depending on whether they maintain an office in-state, considered a resident, or out-of-state, considered a non-resident. Regardless of the location of the insurance business, in order to do business in a state the broker or insurance company must be licensed. Once granted, the license remains viable until it expires, or until it is revoked or suspended. Licenses for businesses engaging in reinsurance may expire sooner than licenses granted to individuals.