reinsurance
Also called: reinsurance
Insurance bought by an insurance company to share large risks with another party.
What it means
Reinsurance is the transfer of part of the risk from an insurance company to a reinsurance company. The aim is to maintain the insurer's ability to pay large claims without disrupting its finances. For policyholders, the relationship remains with the original insurance company, not with the reinsurer. This practice is common in Indonesia for high-value risks.
Why it matters for families
Reinsurance affects confidence that large claims can actually be paid. A company whose risks are spread is more resilient when facing large simultaneous claims. For families, this is not something they need to handle themselves, but it is useful for assessing the insurer's credibility. Do not assume reinsurance adds benefits to the policy.
Example
Suppose an insurance company underwrites a life policy worth billions of rupiah. Part of that risk is transferred to a reinsurer so claims stay smooth. The policyholder still files claims with the insurance company where the policy was bought.
Common misunderstanding
Many think reinsurance means the policy moves to another company. The correction is that the contract with the policyholder remains with the original insurance company.