How to Process Reinsurance

Reinsurance is the little-known underpinning that keeps the insurance industry profitable. Reinsurance is insurance companies sharing the responsibility to payout policy benefits and share collected policy premiums. Given the wide array of policies & agreements between companies, this presents a logistical problem that can be managed with a few guidelines.


  1. Image titled Process Reinsurance Step 1
    Gather all the information possible about your agreements with other insurance companies, specifically, under what conditions do you re-insure (or retain) a policy, or how do you share that policy.
  2. Image titled Process Reinsurance Step 2
    Gather all the information possible about each policy type (a.k.a. "plan")
  3. Image titled Process Reinsurance Step 3
    Gather all information about each individual policy. These usually come in the form of a text/xlm "extract" file from your (or your ceding) company's administrative system.
  4. Image titled Process Reinsurance Step 4
    Determine premiums in this order: a) Look at each policy's plan: note its status/policy age, etc. See what treaties come into effect with policies of this plan, and note what rates apply to this policy (rates might be determined further by whether the insured is a man or woman, is a smoker or nonsmoker, how old the insured is, and if the insured falls into a "preferred" or "non-preferred" category, which basically means b) Look at the treaties. See how this policy will be billed to the each insurance company.
  5. Image titled Process Reinsurance Step 4
    Make up a bill report for each company you plan to bill or pay. This is usually done on a monthly basis.


  • Run your method in a testbed, and compare results with previous month's runs.
  • Make sure you can run reports on your data. Again, flexibility is key.
  • Get to know your actuarial department. Buy them lunch from time to time. You want them on your side if you ever want to get your job done.
  • Keep your method consistent but flexible. If you need to write your own program to keep track of all this data, make sure it can process under the widest array of conceivable scenarios possible.
  • Remember that reinsurance administration is complicated stuff - the devil is in the details; oftentimes in dates (birthdays, anniversaries, paid-to dates) and policy status.


  • If at first you do not succeed at your reinsurance processing method, DON"T GIVE UP!! But also weigh your time and money carefully. This is the type of project that could cost your company a quarter million dollars in dev time if you're not careful. If you think it might approach that value, then consider a third-party reinsurance system. Otherwise you are working in an agile environment, and might save your company money in the long run.

Things You'll Need

  • A good comparison program like Ultra Compare or Beyond Compare.
  • Get a good text editor too (for looking at input "extract" data like Ultra Edit.
  • You might consider purchasing a pre-made reinsurance system like the TAI Reinsurance System or Quasar Systems to help you with data processing, storage, and reporting.

Article Info

Categories: Insurance