What is inwards reinsurance?

Inwards reinsurance refers to the practice where an insurance company (the ceding insurer) purchases reinsurance policies from another company (the reinsurer) to protect itself against potential losses from claims. This allows the ceding insurer to mitigate risk, stabilize its financial performance, and increase its capacity to underwrite more policies. Inwards reinsurance is a crucial component of the insurance industry, providing a safety net for insurers facing large or unexpected claims.