Assumption reinsurance
Okay kiddo, let me explain what assumption reinsurance is. Imagine you have a toy that you want to share with your friend, but you also want to make sure that your toy is still safe and protected. So, what do you do? You give your toy to your parents, who promise to take care of it for you. Then, you ask your friend if they want to play with your toy, but you tell them that they have to ask your parents first.
Well, in the grown-up world, companies have toys too, but instead of toys, they have insurance policies that they sell to people to protect them from things like car accidents, fires, or sickness. Sometimes these companies don't want to keep all of the policies themselves, so they give them to another company that promises to take care of them, just like your parents promised to take care of your toy.
Now, the new company has the responsibility of making sure the policies are still protecting the people who bought them. But, just like your friend, sometimes other companies want to buy some of these policies to have for themselves. This is where assumption reinsurance comes in. The new company sells some of the policies to the other company, but they promise that they will still make sure the policies are being taken care of, just like your parents promised to take care of your toy while your friend played with it.
So, assumption reinsurance is kind of like sharing toys, but instead of toys, it's insurance policies, and instead of parents, it's companies that promise to take care of them.
Well, in the grown-up world, companies have toys too, but instead of toys, they have insurance policies that they sell to people to protect them from things like car accidents, fires, or sickness. Sometimes these companies don't want to keep all of the policies themselves, so they give them to another company that promises to take care of them, just like your parents promised to take care of your toy.
Now, the new company has the responsibility of making sure the policies are still protecting the people who bought them. But, just like your friend, sometimes other companies want to buy some of these policies to have for themselves. This is where assumption reinsurance comes in. The new company sells some of the policies to the other company, but they promise that they will still make sure the policies are being taken care of, just like your parents promised to take care of your toy while your friend played with it.
So, assumption reinsurance is kind of like sharing toys, but instead of toys, it's insurance policies, and instead of parents, it's companies that promise to take care of them.