You may not have heard of reinsurance. It's a way that insurance companies share the risk of big losses with other insurance companies — effectively, it's insurance bought by an insurance company from another insurance company. It spreads the risk across many companies, protecting them from large or unforeseen losses. This works in the same way as ordinary insurance, but on a much larger scale. Reinsurance attorneys work to make sure that contracts benefit their clients, and, if necessary, take legal action against a reinsurer or other body if a contract is violated. They're much like other legal jobs that attorneys may take, but reinsurance jobs are much more specialized.
The majority of attorney jobs of this type are found in specialist insurance companies, such as hurricane or earthquake reinsurers.
What Reinsurance Does for Customers
The benefit of reinsurance to the end consumer is that it allows the entire insurance industry to work more efficiently. The work that reinsurance attorneys perform allows insurance company to insure companies and individuals for larger amounts, to be protected against very large losses, to stabilize operations from one year to the next, and to protect business against cyclical business trends. Reinsurance attorneys also provide underwriting expertise for new markets or new lines of insurance that a company wouldn't otherwise be able to access.
Reinsurance Attorney Jobs
The majority of attorney jobs of this type are found in specialist insurance companies, such as hurricane or earthquake reinsurers. Most of these companies operate globally. The company buying reinsurance is called the ceding insurer. The company selling reinsurance is known as the reinsurer. Most of the usual reinsurance transactions with which a reinsurance attorney deals involve sharing risk between numerous reinsurers. Since reinsurance deals with indemnification contracts, reinsurance can only be paid after the ceding insurer has already paid losses under its own reinsurance or insurance contracts. The insurer's customers must be paid before the reinsurance can take effect.
How Reinsurance Works
Reinsurance works much like ordinary insurance, but on a larger scale. With ordinary insurance, one house which burns out of 500 will be covered by the premiums paid by the other 499 homes. However, catastrophic disasters, such as hurricanes or wildfires, might destroy all the homes in one area. In that case, the premium paid by unaffected policyholders wouldn't be adequate to cover all the destroyed homes.
A policy advised by a reinsurance attorney would protect against this situation. Other areas will not have suffered from a catastrophe, allowing multiple insurers to spread the risk of potential catastrophes. This allows more policies to be paid by the insurer.
Different Types of Reinsurance
As part of reinsurance legal jobs, you'll encounter two different types of reinsurance. These are Excess of Loss Reinsurance and Proportional Basis Reinsurance. An Excess of Loss contract means that the ceding insurer keeps all losses up to a particular level, and the reinsuring company covers any losses beyond that level. The contract usually states a ceiling for loss coverage. In Proportional Basis Reinsurance legal jobs, all losses and premiums between the reinsurer and ceding insurer are prorated on a prearranged basis. This type is frequently used in property reinsurance.
Types of Reinsurance Contracts
Two types of reinsurance contracts might be encountered by attorneys in this field. Treaty reinsurance comes in the form of a broad contract that covers a block of the ceding company's total book of business, such as an entire property class. This type of reinsurance automatically covers all risks in the specific business class covered, unless specifically excluded in the contract. While the reinsurer or their reinsurance attorney isn't required to review every individual risk associated with this treaty, it is important to be aware of the ceding insurer's overall underwriting policies and business policies.
Facultative reinsurance is written for a specific risk of the ceding insurer, and generally covers catastrophic risks. This type of reinsurance covers individual underlying policies, and is written on a policy-specific basis. Parties negotiate the terms and conditions for each individual contract separately. The ceding insurer provides the reinsurer with an individual risk policy, which the reinsurer may reject or accept.
People seeking this type of position should have experience in dealing with the insurance and reinsurance field.
Reinsurer Insurance
A reinsurance attorney may also encounter retrocession — insurance for reinsurance. Reinsurers buying this kind of reinsurance are called retrocessionaries. The reinsurers selling retrocession are called retrocedants. Retrocession is another way to spread the reinsurance risk. One thing that you'll encounter as a reinsurance attorney is the common tendency to buy reinsurance protection from other reinsurers. If a reinsurer is providing proportional basis reinsurance, it may need to protect itself from catastrophes. Reinsurers providing policies on an excess of loss basis might need to protect their companies against accumulated losses.
Reinsurance Contracts in Law Jobs
Like all other contracts in legal jobs, reinsurance contracts must be created to clearly express both parties' intent. The rules of contract interpretation and general contract law apply to reinsurance contracts. Accordingly, reinsurance lawyers must have a good knowledge of general contract law in addition to those of their legal specialty.
Average Reinsurance Attorney Salary Expectations
The average salary that can be expected for reinsurance attorneys is $73,000. Like all jobs, the amount you'll be paid will vary depending on where you live, what the local cost of living is, and the prestige of the firm for which you work. Your experience and education will have an impact on pay as well.
Conclusion
Reinsurance attorneys are a specialized branch of the legal field. Because of that, they require specific knowledge in addition to the typical requirements for becoming an attorney. People seeking this type of position should have experience in dealing with the insurance and reinsurance field. Like many specialized positions, this field isn't growing rapidly, but maintains a steady pace, since the demand for reinsurance attorneys is unlikely to abate.
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