A reinsurance agreement by which one company permanently transfers full responsibility for a block of policies to another company. This transfer is done in exchange for the assets underlying the liabilities and the right to receive future premiums; it is evidenced by an assumption certificate issued to the insured who, in some jurisdictions, has the right to refuse the change of insurers. After the transfer, the ceding company is no longer a party to the reinsurance agreement. While this is referred to as "reinsurance," it is actually a novation. See Novation.
A type of reinsurance that involves the total and permanent transfer of risk from the issuing company to a reinsurer. In assumption reinsurance, a reinsurer purchases a block of in-force insurance, creating contractual relationships with all insureds and assuming responsibility for policy administration and all liabilities. Contrast with indemnity and reinsurance. See also reinsurance.
A form of reinsurance where a block of business is assumed in its entirety by another insurance company. The effect is to transfer the risk from one insurance company to another.
A transaction in which one insurer transfers its liabilities under existing or in-force contracts to an assuming insurer. The transfer is intended to extinguish the assignor's liabilities under the contracts being assigned.
Assumption reinsurance is a form of reinsurance whereby the reinsurer is substituted for the ceding insurer and becomes directly liable for policy claims. This ordinarily requires a notice and release from affected policyholders. In the more typical reinsurance arrangement, the reinsurer has an obligation to indemnify the ceding insurer, which remains liable for claims on policies it has issued, and policyholders' approval is not required.