Coinsurance

The term coinsurance covers two distinct realities that it is important not to confuse. In its most common sense in large-risk insurance, coinsurance denotes the horizontal sharing of a single risk among several insurers, each taking a share, or quota, of premiums and losses, on one and the same policy. One of them, the lead insurer, acts as leader, manages the contract and coordinates the others. This mechanism allows a risk too heavy for a single insurer to be spread, unlike reinsurance which operates as a second curtain, coinsurance acting directly at the level of primary insurance. In a second sense, present above all in personal insurance and in contracts of Anglo-Saxon inspiration, coinsurance denotes the fraction of a loss that the insured keeps for their own account, expressed as a percentage, beyond the deductible. This proportional participation aims, like the deductible, to keep the insured interested in controlling the risk and to limit moral hazard. The context generally resolves the ambiguity between these two senses, the first relating to the structure of the risk, the second to its sharing with the insured.

To cover a large refinery, three insurers share the risk in coinsurance, the lead insurer carrying fifty percent and the two others twenty-five percent each, on a single policy managed by the leader.

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