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Reinsurance Intermediary

A broker or manager arranging reinsurance placements between cedents and reinsurers, earning commission on placed premium for treaty and facultative deals.

industryPublished 2026/06/07Last verified 2026/06/07

FAQs

Who does a reinsurance broker legally represent?
In the United States, a reinsurance broker is generally deemed the agent of the cedent (insurer) it is placing reinsurance for—even though the broker's commission is typically paid by the reinsurer out of premium. This means the broker has fiduciary-like duties to the cedent regarding placement accuracy, timeliness, and disclosure of material information.
What is an intermediary clause in a reinsurance contract?
An intermediary clause names the reinsurance broker through whom all notices and payments must flow. It establishes that payment to the broker constitutes payment to the cedent (for premium remittances) and payment by the broker constitutes payment by the reinsurer (for loss recoveries). This protects each party if the broker becomes insolvent while holding funds.
Do small insurers need reinsurance intermediaries or can they place directly?
Direct placement is possible but uncommon except with large, well-capitalized cedents that have established relationships with specific reinsurers. Most cedents—particularly those placing in multiple markets or seeking competitive pricing—use brokers. The market intelligence, relationships, and analytical support that established intermediaries provide typically justify the brokerage cost.

Related Terms

  • Quota Share

    A proportional reinsurance treaty where cedent and reinsurer share premium and losses at a fixed percentage, transferring a set portion of every policy.

  • Delegated Authority

    The contractual underwriting, binding, and claims authority a carrier grants to an MGA or coverholder to write risks without prior carrier approval.

  • Wholesale Insurance Distribution

    The channel where surplus lines brokers act as intermediaries between retail agents and specialty or non-admitted markets retail agents cannot directly access.

  • Errors and Omissions (E&O) Insurance

    Professional liability insurance for agents and brokers covering claims alleging failure to obtain proper coverage, improper advice, or administrative errors.

Related Items

  • Verisk

    Claims intelligence, ISO forms and fraud scoring layer

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A reinsurance intermediary is a licensed professional—either a reinsurance broker or a reinsurance manager—who acts as an intermediary between an insurance company (the cedent) seeking to transfer risk and the reinsurers willing to assume that risk. Intermediaries earn a brokerage commission, typically 1% to 5% of ceded premium, built into the reinsurance pricing.

How It Works / Why It Matters

Unlike direct insurance, where agents and brokers work primarily for buyers, reinsurance intermediaries occupy a more complex position. Legally and commercially, the reinsurance broker typically acts as the agent of the cedent—it represents the insurer seeking reinsurance protection, negotiates terms with the reinsurance market, and places coverage. Yet the broker's commission is paid by the reinsurer out of premium, creating inherent tension that regulators and sophisticated cedents understand and manage through transparency and contractual clarity.

There are two distinct license categories under US state law and NAIC model regulation:

Reinsurance Intermediary-Broker (RI-B): Represents the cedent in negotiating and placing reinsurance with reinsurers. Requires a license in most states. Must maintain errors and omissions coverage and, in many states, keep client funds segregated.

Reinsurance Intermediary-Manager (RI-M): Has authority delegated by a reinsurer to accept, on behalf of that reinsurer, risks or classes of risks submitted by cedents. This is the reinsurance equivalent of an MGA—the RI-M can bind the reinsurer. Requires more extensive oversight by the reinsurer and broader licensing.

The largest reinsurance intermediary firms—including Guy Carpenter, Aon Reinsurance Solutions, and Gallagher Re—handle enormous volumes of global reinsurance placement, providing market intelligence, negotiation leverage, and analytical services to cedents that would be impossible to replicate independently.

In Practice

Treaty reinsurance placement: A regional property carrier wants to protect against catastrophic property losses. Its reinsurance broker analyzes the carrier's portfolio, models probable maximum losses using catastrophe models, develops a submission for the reinsurance market, approaches multiple reinsurers at Lloyd's and in Bermuda, negotiates pricing and terms, and assembles a reinsurance panel—multiple reinsurers each taking a percentage share of the treaty. The broker manages the placement to completion and handles annual renewal negotiations.

Facultative placements: A commercial lines carrier has a single large risk—a high-value petrochemical facility—that exceeds its treaty reinsurance capacity or falls outside treaty eligibility. The broker places facultative reinsurance on that specific risk, often with specialty markets including Lloyd's syndicates. Facultative placements are negotiated individually and require more intensive broker involvement per risk.

Errors and omissions exposure for reinsurance intermediaries is significant. If a broker fails to place coverage as instructed, misses a binding deadline, or creates ambiguity in a slip that later affects a claim, it may face liability to the cedent for uncovered losses. This e-and-o exposure is a defining professional risk of the role.

Analytical platforms like Verisk provide the catastrophe modeling and exposure analytics that underpin treaty reinsurance negotiations.

Related Concepts

Understanding reinsurance intermediaries requires familiarity with quota-share (a fundamental treaty structure), delegated-authority (relevant when the intermediary acts as RI-M), and wholesale-distribution (which parallels the intermediary role in primary markets).