coinsurance

  • A term used to denote a plan of indemnity reinsurance wherein the reinsurance is based on the policy issued by the original insurer to the insured. The assuming company (reinsurer) assumes not only a mortality risk but also the nonforfeiture obligations including a portion of surrender values and policy loans, and an obligation to pay a proportionate part of all dividends declared by the original insurer on participating policies. Thus, the reinsurer receives a proportionate part of the gross premium collected by the original insurer and, if the coinsurance is with respect to an existing block of business, the ceding company (original insurer) will also transfer the assets which it holds with respect to the existing reserves to the assuming company.

    Internal Revenue Service 1

1Internal Revenue Service, Internal Revenue Manual 4.42.6 Glossary, http://­www.irs.gov/­irm/­part4/­irm_04-042-006.html (last accessed Dec. 22, 2009).