Quora Answer: How is the Owner of the Life Policy, Once It is in Force, Aware When the Policy is Reinsured?

The following is my answer to a Quora question: “How does the owner of the life policy, once it is in force, know that the policy is reinsured?”

This information is not available to the policy owner since it does not affect him materially.  Regardless of whether the policy is reinsured or not, he still gets his claim paid out.  Where the money comes from is immaterial to him or his estate.

Reinsurance is a means for insurance companies to spread the risk of coverage, and the contract is between the insurer and the reinsurer.  To put it simplistically, it is insurance on a group of insurance policies.  This is especially so in instances where there is a possibility of a group claim over a specific demographic within a specific period of time.  For example, imagine if 2,000 people go on a cruise ship, and they all buy life insurance of $1 million coverage, from the same company, and the ship sinks, drowning all of them, the insurer has to pay out for 2,000 people, for a total of $2 billion.  In reality, it is not so simple.  We are looking at groups divided by area, demographics, and other patterns in claim history, or simply batches incepted at specific periods.  This is especially pertinent for relatively smaller insurers.