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🛒 '''Reinsurance buying''' is the strategic process through which [[Definition:Insurance carrier | insurers]] and other [[Definition:Cedent | ceding companies]] design, negotiate, and place [[Definition:Reinsurance | reinsurance]] programs to protect their balance sheets against large, volatile, or concentrated losses. Far from a routine procurement exercise, reinsurance buying sits at the intersection of [[Definition:Actuarial science | actuarial analysis]], [[Definition:Capital management | capital management]], and corporate strategy — the choices a company makes about how much risk to retain, how much to cede, and on what structural terms shape its [[Definition:Risk appetite | risk appetite]], pricing competitiveness, and regulatory capital position.

🔄 The buying cycle typically begins with an internal assessment of the cedent's exposure profile, [[Definition:Loss history | loss history]], and capital resources, often supported by [[Definition:Catastrophe model | catastrophe models]] and [[Definition:Actuarial analysis | actuarial projections]]. The buyer — sometimes working with a [[Definition:Reinsurance broker | reinsurance broker]] such as Aon, Guy Carpenter, or Gallagher Re — then structures a program combining various forms of protection: [[Definition:Quota share | quota share]] and [[Definition:Surplus treaty | surplus treaties]] on the [[Definition:Proportional reinsurance | proportional]] side, [[Definition:Excess of loss reinsurance | excess-of-loss]] layers on the [[Definition:Non-proportional reinsurance | non-proportional]] side, and potentially [[Definition:Catastrophe bond | catastrophe bonds]] or other [[Definition:Insurance-linked security (ILS) | ILS]] instruments. Placement occurs through negotiation with [[Definition:Reinsurer | reinsurers]] — either in the open market, through [[Definition:Lloyd's of London | Lloyd's]] syndicates, or via facilities — and the terms agreed upon reflect current [[Definition:Reinsurance market cycle | market conditions]], the cedent's track record, and prevailing views on emerging risks. Regulatory frameworks also influence buying decisions: [[Definition:Solvency II | Solvency II]] in Europe, the [[Definition:Risk-based capital (RBC) | RBC]] framework administered by the [[Definition:National Association of Insurance Commissioners (NAIC) | NAIC]] in the United States, and [[Definition:C-ROSS | C-ROSS]] in China each assign different capital credits for different reinsurance structures, steering cedents toward particular program designs.

📊 Effective reinsurance buying can materially reshape an insurer's financial profile. A well-constructed program smooths [[Definition:Earnings volatility | earnings volatility]], releases capital for growth, improves [[Definition:Credit rating | credit-rating]] agency assessments, and provides the confidence to write larger or more complex risks. Conversely, poorly timed or inadequately structured buying — such as purchasing insufficient [[Definition:Aggregate cover | aggregate protection]] ahead of a heavy catastrophe season — can leave a company dangerously exposed. The hardening [[Definition:Reinsurance market cycle | market]] that followed years of elevated natural catastrophe losses in the early 2020s underscored how critical buying strategy is: cedents that had secured multi-year cover or diversified into [[Definition:Alternative capital | alternative capital]] sources navigated renewal seasons far more smoothly than those relying solely on traditional spot-market placements.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Reinsurance]]
* [[Definition:Reinsurance broker]]
* [[Definition:Cedent]]
* [[Definition:Excess of loss reinsurance]]
* [[Definition:Catastrophe bond]]
* [[Definition:Reinsurance market cycle]]
{{Div col end}}

Definition:Reinsurance buying - Revision history

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