Life Reinsurance

by Jack R. Scott*


     The purpose of life reinsurance is to enable an insurance company to transfer to another insurer a portion of the risks assumed in connection with the issuance of a life insurance policy or annuity contract. Through the vehicle of life reinsurance, the company issuing the policy can increase its capacity to insure large individual and aggregate risks of the business of life insurance. This chapter will convey a sense of the business of life reinsurance by describing the types of life reinsurance contracts most commonly employed in the industry and by describing selected contractual provisions and the issues commonly raised by such provisions.

The Underlying Reinsured Contracts
     Before any discussion of life reinsurance can be meaningful, it is necessary to gain a basic familiarity with the terms that describe the lines and plans of life insurance that will ultimately be reinsured. The range of specialized life insurance products is practically limitless. Accordingly, this discussion will touch upon the broad categories and common types of life insurance only, and only to the extent needed to understand the process of reinsurance.

     Historically, a "line" of life insurance has been used to describe a general approach used in providing insurance coverage, such as group, industrial, or ordinary insurance. The lines most frequently reinsured are group and ordinary. In this context, group insurance provides coverage for a group of people under a single contract. The most common group insured in this manner is that of employees, with the master group insurance contract issued to the employer. Each insured

* Senior Counsel, CIGNA CORPORATION, 1601 Chestnut Street 21st Floor, P.O. Box 7716, Philadelphia, Pennsylvania 19192-2211. An autobiography follows the chapter. This chapter was prepared while the author served LIFE REASSURANCE CORPORATION OF AMERICA in Stamford, Connecticut, as its Vice President and General Counsel. The views expressed, therefore, are those of the author only.

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