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🔄 '''Yearly renewable term (YRT) reinsurance''' is a form of [[Definition:Reinsurance | reinsurance]] — most prevalent in the [[Definition:Life insurance | life insurance]] sector — in which the [[Definition:Ceding company | ceding company]] transfers a portion of its mortality risk to a [[Definition:Reinsurer | reinsurer]] on a one-year, automatically renewable basis. Rather than ceding entire policy cash flows or reserves, YRT arrangements focus narrowly on the [[Definition:Net amount at risk | net amount at risk]]: the gap between the [[Definition:Death benefit | death benefit]] payable and the policy's accumulated [[Definition:Policy reserve | reserve]]. This makes YRT the reinsurance equivalent of annually renewable term life coverage, and it remains one of the most widely used structures for managing life portfolio mortality volatility.

⚙️ Each year, the ceding insurer pays [[Definition:Reinsurance premium | reinsurance premiums]] to the reinsurer based on the current net amount at risk and an agreed-upon set of mortality rates, which typically increase with the insured's attained age. If a covered death occurs, the reinsurer reimburses the ceding company for its share of the net amount at risk rather than the full face amount. Because YRT premiums recalibrate annually, they start low on younger or newly issued blocks of business and escalate over time — a pattern that can create cash-flow planning challenges for the cedant. The terms governing rate guarantees, recapture rights, and renewal conditions are spelled out in the [[Definition:Reinsurance treaty | reinsurance treaty]], and disputes over rate increases on in-force blocks have occasionally led to significant market friction between cedants and reinsurers.

💡 From a strategic standpoint, YRT reinsurance gives life insurers a flexible, capital-efficient tool for smoothing out mortality fluctuations without surrendering long-term economic value from their policies. It consumes less [[Definition:Regulatory capital | regulatory capital]] than retaining the full risk, helping cedants optimize their positions under frameworks like [[Definition:Risk-based capital (RBC) | risk-based capital]] requirements. However, reliance on YRT exposes cedants to the risk of future premium increases if the reinsurer exercises re-rating provisions — a scenario that played out across parts of the market in the 2010s and prompted many carriers to diversify toward [[Definition:Coinsurance | coinsurance]] or [[Definition:Modified coinsurance (modco) | modified coinsurance]] structures. For [[Definition:Actuarial science | actuaries]] modeling long-term profitability, accurately projecting YRT costs across the lifetime of a block is essential to sound [[Definition:Embedded value | embedded value]] and [[Definition:Pricing | pricing]] analysis.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Reinsurance]]
* [[Definition:Life insurance]]
* [[Definition:Net amount at risk]]
* [[Definition:Coinsurance]]
* [[Definition:Ceding company]]
* [[Definition:Mortality risk]]
{{Div col end}}

Definition:Yearly renewable term (YRT) reinsurance - Revision history

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