For example,  your home insurance carrier purchases an insurance contract that protects them if the losses from a catastrophe exceed $20 million.  In this case the insurance company that insures your house would pay the first $20 million in claims  and another insurer would reimburse the carrier for any amount above that amount.

The companies that provide reinsurance charge a premium to the primary carriers for the cost of the protection. Recently, the State of Connecticut Insurance Department has allowed  insurance companies to pass along their cost of reinsurance to consumers.

Why is this important to you? Well, if the carrier that insures  your home or business does not have reinsurance they may not have enough capital to pay all the claims as a result of a serious catastrophe. The question is not if a serious storm should occur it is when a serious storm occurs will your carrier have the capacity to pay the claims.

Two questions should be asked of your agent?

1. Does the carrier the agent is placing the business with have reinsurance to cover claims if there is a catastrophe?
2. Will that carrier be passing on the additional cost of the reinsurance premium to the policyholder?

Paul, Peter and Tim Haas