The Reinsurance Iceberg

The insurer on your policy card is the visible tip. Above it sits a web of treaties and retrocession that decides whether a hurricane gets paid.

A property insurer may keep the first 250 million of an event and lay off layers to reinsurers in Bermuda and Europe, who pass pieces onward, sometimes into capital markets through catastrophe bonds. This iceberg is why insurers can write billions in coastal exposure with a fraction of that in capital.

It also concentrates risk: correlated losses cascade up the chain, and a retrocessionaire failure can leave a reinsurer holding more than it sold. Solvency rating agencies spend their lives mapping the connections under the waterline..