What is a Reinsurance Company responsible for?

A reinsurance company is primarily responsible for accepting liabilities from another insurer. This process allows primary insurance companies to transfer a portion of their risk to the reinsurer, thereby reducing their overall exposure to large losses. By doing so, reinsurance companies help stabilize the insurance market by providing additional capacity to insurers, allowing them to underwrite more policies than they might otherwise be able to handle alone.

This function is crucial for maintaining the financial health of insurance companies, especially during catastrophic events where claims may exceed the original insurer's capabilities. The reinsurance agreement can vary widely, with terms structured to suit the needs of both the primary insurer and the reinsurer, including proportional and non-proportional reinsurance models.

While the other options refer to functions that may relate to the insurance industry, they do not accurately describe the primary role of reinsurance companies. Developing new insurance policies typically falls under the purview of primary insurance companies. Regulating insurance markets is the responsibility of governmental or independent regulatory bodies, not reinsurance firms. Providing legal advice is generally managed by legal professionals and not inherently a function of reinsurance companies.