What's the Role of a Reinsurance Broker? (2024)

What is reinsurance broking? What do they do exactly? What's my role in it?

These are the questions that nagged at my mind when I initially joined the industry. I constantly felt like a little kid out in the field ready for war but struggling to understand where we can contribute and how the big picture is like.

Thankfully, over the course of a year, my exposures allowed me to appreciate and comprehend the essential functions of a reinsurance broker amidst the industry's overall supply chain.

" These are exciting times to be a reinsurance intermediary. Our insurance clients worldwide are increasingly looking to us for both strategic and transactional support in their quest to achieve profitable growth " - David Priebe, Vice Chairman of Marsh & McLennan Companies' Guy Carpenter

Surprisingly, the answers can be succinctly found in the Reinsurance Basic Concepts exam I took recently. It highlighted nine fundamental services and reasons for using a reinsurance broker:

1. Reinsurance Expertise and Technical Advice

To fact-find and provide insurers with independent advice on designing and placing reinsurance programmes. These technical expertise can include catastrophe modelling and enterprise risk management. Some outstanding brokers are even able to 'underwrite' risks themselves before showing it to reinsurers (more applicable in facultative reinsurance).

2. Market Intelligence and Data

An experienced broker is able to gather and monitor data to provide trends and opportunities for both insurers and reinsurers. Their understanding of how a reinsurer operates and make decisions will help greatly in getting insurers' risks accepted.

3. Cross-border Access for Reinsurance Solutions/Capacities

Reinsurance brokers tend to be able to access the various national reinsurance markets better, especially if they have international operations at these locations. Smaller brokers are also able to achieve the same results by partnering with other reinsurance brokers overseas. Essentially, this cross-border access allows a smaller insurers to seek reinsurance globally.

4. Inspection of Potential Reinsurers for its Counterparty Credit Risk, Services and Credibility, among others.

While we all have AM Best for reviewing the Credit Ratings of Reinsurers (which can be highly time-consuming to monitor), reinsurance brokers are usually privy to the services and credibility of reinsurers and can help to protect both insurers' interests.

5. Claims Processing

Delegation of reinsurance claims processing and recovery so that insurers can focus purely on the direct policyholders' needs.

6. Finalising Reinsurance Contract Wordings

Ensuring Contract Certainty Guidelines are adequately met and both parties have clarity on the terms and conditions of the policy. Additionally, to provide documentation for both parties.

7. Administration of Reinsurance Contracts and Settlement of Balances (Premiums, Claims, Fees)

The heavy lifting and workload can actually come after a reinsurance contract is placed. For treaties, it could relate to the Quarterly Accounts. For facultative reinsurance, monthly statement of accounts are supposedly to be generated for review (but this is thankfully rare).

8. Filter Reinsurance Risks to suit Reinsurers' Risk Appetite and Portfolio Objectives

This is akin to a sniper having a spotter right by his side at all times to guide the reinsurance underwriter in where best to 'take a shot' at and underwrite a risk.

HowStuffWorks has these to say about the sniper/spotter relationship,

  • " The most important job of the spotter is to protect the sniper and the team " ;
  • " The relationship between a sniper and his spotter is very important. Both depends on each other for survival. "

9. Compulsory in Certain Markets (e.g. Lloyd's of London) to place businesses with a Lloyd's Syndicate through a Lloyd's Broker

In summary, my current opinion of a reinsurance broker is that they help both reinsurers and insurers to maintain a profitable book of business by improving their premium income, reducing their risk exposure and save on operational costs through the 'outsourcing' of reinsurance-related processing and services.


10. Obtaining the most competitive rates and terms for the client

Last but not least, as a reader rightly pointed out, one of the fundamental role of the broker is to negotiate and procure the most competitive premiums, rates and terms for their client. This could be achieved by bundling different businesses together for the reinsurers and could even help in encouraging reinsurers to accept a risk which it might have declined.

" We must consider ourselves as custodians of our market, responsible for leaving it a better place than that which we find it " - Steve Hearn, CEO of Wholesale Broker Ed

What's your opinion on reinsurance brokers? Do you think that reinsurance brokers are necessary? It will be interesting to explore the reasons and scenarios leading up to an insurer and reinsurer skipping out on reinsurance brokers and dealing with each other directly.

Source: SCI's Basic Concepts and Practices, HowStuffWorks

What's the Role of a Reinsurance Broker? (2024)


What's the Role of a Reinsurance Broker? ›

A reinsurance broker is an intermediary individual or firm who is paid a fee or commission to find and place new business on behalf of both the insured client and insurer. This can involve negotiating rates or contracts while sourcing the best-suited policies on the market.

What is the role of a broker in reinsurance? ›

Reinsurance Broker means an insurance broker, registered by the Authority, who for a remuneration and/or a fee, solicit and arranges re-insurance for its clients with insurers or reinsurers with reinsurers and/or insurers located in India and/or abroad; and/or provides claims consultancy, Risk Management services or ...

How do reinsurance brokers get paid? ›

The primary way that an insurance broker makes money is from commissions and fees earned on sold policies. These commissions are typically a percentage of the policy's total annual premium.

What is the difference between a reinsurer and a reinsurance broker? ›

Reinsurance contracts may be negotiated with a reinsurer or arranged through a third party; i.e., a reinsurance broker or intermediary. Reinsurers may also buy reinsurance protection, which is called “retrocession.” This is done to reduce any further spread risk and the impact of catastrophic loss events.

What is the primary responsibility of an insurance broker? ›

You'll connect clients with the insurance company that meets their needs and offers them the best value. Depending on the customers' specifications, you could help them find the cheapest insurance or the insurance that provides the best coverage.

Do reinsurance brokers make good money? ›

As of May 2, 2024, the average hourly pay for a Reinsurance Broker in California is $50.63 an hour. While ZipRecruiter is seeing salaries as high as $54.61 and as low as $49.37, the majority of Reinsurance Broker salaries currently range between $51.11 (25th percentile) to $53.61 (75th percentile) in California.

Who is the largest reinsurance broker? ›

Aon Reinsurance Solutions

How much does a reinsurance broker earn in USA? ›

Reinsurance Broker Salary
Annual SalaryHourly Wage
Top Earners$109,000$52
75th Percentile$107,500$52
25th Percentile$102,500$49

Who appoints reinsurance broker? ›

However, after following a due and transparent process if the insurer appoints the composite broker as a reinsurance broker for arranging reinsurance on the same risk on which the composite broker acted as a direct broker, the composite broker shall ensure that there are proper systems and controls in place to see that ...

Where do reinsurers get their money? ›

Under proportional reinsurance, the reinsurer receives a prorated share of all policy premiums sold by the insurer. For a claim, the reinsurer bears a portion of the losses based on a pre-negotiated percentage. The reinsurer also reimburses the insurer for processing, business acquisition, and writing costs.

What is reinsurance in simple words? ›

Reinsurance is a type of insurance that is purchased by insurance companies to reduce risk. Essentially, reinsurance may restrict the cost of damages that the insurer can theoretically experience. In other words, it saves insurance providers from financial distress, thus shielding their clients from undisclosed risks.

Do reinsurance brokers get commission? ›

Reinsurance brokers earn their revenues either in the form of a commission or in the form of a fixed fee. Sometimes the structure is a combination of the two.

Is it a good idea to be a reinsurance? ›

Reinsurance reduces the net liability on individual risks and catastrophe protection from large or multiple losses. The practice also provides ceding companies, those that seek reinsurance, the chance to increase their underwriting capabilities in number and size of risks.

What are the disadvantages of insurance brokers? ›

What are the disadvantages of using an insurance broker? An insurance broker typically doesn't know all the policy details for every policy type and insurance company. There could be policy exclusions, terms and conditions they may not be aware of when suggesting an insurance company or specific policy.

What are the pros and cons of insurance brokers? ›

The advantages include cost-effectiveness, expertise, and their ability to offer an extensive range of policy options, thus saving consumers looking for coverage time and effort. Similarly, disadvantages include less professionalism and sometimes high broker fees.

Are insurance brokers liable? ›

Failure by an insurance broker to make sure that their client has appropriate cover for its business needs may result in that client being exposed to claims for which it is not insured. In that case, there may be a claim against the insurance broker in negligence.

Who pays the reinsurance broker? ›

The reinsurance intermediary does all of this for a brokerage fee, which is paid out of the premium ceded from the reinsured to the reinsurer.

What is the relationship between broker and insured? ›

Depending on the particular role undertaken by the broker in any given transaction, a broker may be found to be acting either as agent of the insured for certain functions (completing and filing the application for insurance) or as agent of the insurer (binding coverage). The broker's primary duty is to the insured.


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