Health reinsurance

Health reinsurance transfers to a reinsurer part of a health insurer's medical cost or sickness benefit risk. It funds growth more than it covers spikes. A mutual that wins a large group contract, or an insurer entering a market, cedes a large share on quota share, often a third or a half. That lightens its capital requirement and earns a commission that pays its acquisition costs. Per-life excess of loss protects against the extreme premature birth, the transplant or the gene therapy. In the United States, AM Best measured in September 2026 roughly 203 billion dollars of ceded health premium in 2025, against 59 billion in 2016, with a sizable share going to Bermuda reinsurers. Globally, health accounts for about half of insurance premium but a small fraction of reinsurance. The nature of the risk explains why: high frequency, bounded individual severity, and a book that reprices every year. The treaty underwriter looks first at medical inflation, which runs several points above general inflation. They also look at who manages the claims, because a health treaty lives off the cedent's claims handling, provider billing and abuse control. Pandemic is the business's catastrophic exception, and it sometimes sits in a life and health Cat XL. Not to be confused with the public reinsurance programs of the ACA markets, which are government mechanisms.