Reinsurance

Reinsurance involves no transaction or privity between the reinsurer and those originally assured.

Insurance effected by an underwriter upon a subject against certain risks with another underwriter, on the same subject, against all or a part of the same risks, not exceeding the same amount. In the original insurance, he is the insurer; in the second, the assured. REIPUBLICAE INTEREST VOLUNTATes defunctorum effectum sortiri. It concerns the state that the wills of the dead should have their effect.

Insurance effected by an underwriter upon a subject against certain risks, with another underwriter, on the same subject, against all or a part of the same risks, not exceeding the same amount. In the original insurance, he is the insurer; in the second, the assured. His object in reinsurance is to protect himself against the risks which he has assumed. There is no privity of contract between the original assured and the reinsurer, and the reinsurer is under no liability to such original assured; 3 Kent 227; New York Cent. Ins. Co. v. Co. v. Ins. Co., 9 Ind. 443; Louisiana Mut. Ins. Co. v. Ins. Co., 13 La. Ann. 246. See Pars. Mari. Ins. 301. In the absence of any usage to the contrary, and of any specific stipulation in the policy, the original insurer may protect himself by reinsurance to the whole extent of his liability; Insurance Co. of North America v. Ins. Co., 140 IJ. S. 565, 11 Sup. Ct. 909, 35 L. Ed. 517. Reinsurance has been considered as a contract of indemnity against liability, not for actual loss; 1 Joyce, Ins. § 134. A reinsurer is liable on his policy although the reinsurance is to the whole extent of the original insurer's liability, as such a contract is valid and is not affected by local custom to the contrary; Insurance Co. of North America v. Ins. Co., 140 U. 8. 565, 11 Sup. Ct. 909, 35 L. Ed. 517. He is liable on a parol agreement to reinsure; Bartlett v. Ins. Co., 77 la. 355, 41 N. W. 601; and to the full extent of his policy notwithstanding the insolvency of the reinsured; In re Republic Ins. Co., Fed. Cas. No. 11,705; which does not al Tect the responsibility under it, the contract of reinsurance being totally distinct from the original insurance; the original insured has no claim against the reinsurers. The reassured remains solely liable on the original insurance and alone has no claim against the reinsurer. Hence if the original insurer become bankrupt and the assured were paid but a small dividend out of his estate, the reinsurer is still liable to pay the whole amount of the reinsurance to the trustee of the original insurer without deducting the dividend and the original assured has no claim in respect of the money so paid; Consolidated Real Estate & Fire Ins. Co. of Baltimore v. Cashow, 41 Md. 59; Strong v. Ins. Co., 62 Mo. 289, 21 Am. Rep. 417. The extent of the liability of the reinsurer is neither contingent upon the amount paid by the reassured, nor upon any payment whatever by him. When a loss occurred w T hich is covered by the policy of reinsurance, the reassured is entitled to recover from the reinsurer not what he has paid, but all that he has become liable to pay by reason of such loss; Gantt v. Ins. Co., 68 Mo. 503. Where the insurer reinsured in the name and for the benefit of the original insured, the reinsurer was held liable to the original insured; 12 N. B. 432. Under an agreement by which the reinsurer agreed to reinsure a life association on all its risks and to assume all such policies and to pay the holders thereof all such sums as the company might under such policies become liable to pay, the reinsurer was held directly liable to a policy holder of the reinsured; Glen v. Ins. Co., 56 N. Y. 379. And so where the reinsurer agreed to reinsure all outstanding fire risks Shoaf v. Ins. Co., 127 N. C. 308, 37 S. E. 451, 80 Am. St. Rep. 804. The contract is one of indemnity to the reinsured and binds the reinsurer to pay to the reinsured the whole loss sustained in respect to the subject of the insurance to the extent to which he is insured. It is not necessary that the reinsured should first pay the loss to the party first insured before proceeding against the reinsurer upon his contract. The liability of the latter is not affected by the insolvency of the reinsured or its inability to fulfill its own contract with the original insured; Allemannia Ins. Co. v. Ins. Co., 200 U. S. 332, 28 Sup. Ct. 544, 52 L. Ed. S15, 14 Ann. Cas. 948, citing Hone v. Ins. Co., 1 Sandf. (N. Y.) 137; Consolidated Real Estate & Fire Ins. Co. v. Cashow, 41 Md. 59. If the contract of reinsurance provides that the insured can sue the reinsurer, it is held in most of the cases that such action will lie; Richards, Ins. Law § 319. As soon as the reinsured company has sustained a loss it may at once bring suit against its reinsuring company; (1892) 2 Ch. 423; Gantt v. Ins. Co., 68 Mo. 503.

Signifies insurance effected by an underwriter (or insurance company) upon the risk he has assumed by the policy he has made. Reinsurance does not mean merely insurance again; and it must not be confounded with double insurance, or second or other insurance, which expressions are used to denote that a person already insured by one company obtains from another a second policy or further policy upon the same property. As any practices of this sort promote frauds upon companies, by malting the total insurance money which may be gained by a wreck or a fire more than the value of the property lost, they are the companies and the conditions of the policies in use. But these are not contemplated by the expression reinsurance. That relates to a mode of protecting an insurer by an insurance in his behalf. There may be various reasons why a company is unwilling to continue subject to the full risk it has assumed by any or aU of its policies. The risk may, by later information, appear greater than was supposed when the policy was granted; or the company may wish to discontinue or change the character of its business; or its capital may have become impaired, so that it would not be able to respond in case of loss, unless entitled to some indemnity over. In any such case, the practice exists of the company's applying to another company to make a policy upon the risk which the first has assumed; and by this policy, if a loss under the original policy occurs, and the first company has to pay, the reinsuring company will be liable either in full or in the sum named by the policy of reiusurance, to reimburse its payment. Thus reinsurance of a risk does not enter into the original contract of insurance, or a Sect it, as between company and insured, at all, but raises a new contract between that company and another. Upon the decision of a company to relinquish business, it is very common to take out reinsurance upon all its risks; and this arrangement, i£ lawful, and safely and soundly made, practically transfers its responsibilities to the reinsuring corporation.