Assets pledged by a reinsurer to secure its obligations toward a cedant.
Collateral is the set of assets a reinsurer pledges to secure its obligations, whether as a deposit, a trust, a letter of credit or funds withheld by the cedant. It turns a claim on a signature into a claim backed by identified assets, which neutralizes credit risk and unlocks reinsurance credit in jurisdictions that require it. The problem it solves is trust between parties with no obligation to know each other: a cedant has no way to audit the future solvency of a reinsurer on another continent, and collateral replaces that trust with a pledge. Its cost is not nil and feeds into price: tying up assets deprives the reinsurer of their use, which is why collateralized markets are structurally dearer at equal rating, and why collateralized reinsurance and insurance-linked securities have developed mechanisms for releasing collateral progressively as obligations extinguish.
A collateralized reinsurance vehicle writes a 25 million euro share of a catastrophe layer in 2026 and deposits the full amount in trust. At the end of the period, no loss having occurred, 22 million is released after six months and the remaining 3 million stays trapped a further eighteen months, until the contractual development period for late reported losses runs out.
Reinsurance collateral, Nantissement de réassurance, Security