Definition
A Credit – Assumption Agreement in the insurance industry refers to a certificate or agreement issued when one insurer (the assuming insurer) takes over all or some of the risks of an existing insurance contract from another insurer (the ceding insurance company). This transfer of responsibility is formally acknowledged through an assumption certificate.
Key Details
- Assuming Insurer: The insurance company that agrees to take over the risks.
- Ceding Insurance Company: The original insurer that transfers the risk to another insurer.
Importance
This agreement is crucial in risk management within the insurance sector, allowing for flexibility and financial optimization. It helps in distributing risk and can lead to more stable financial outcomes by spreading liability.
Regulations and Policies
Refer to the specific provisions under local or international regulatory frameworks that govern insurance transfers, such as the NAIC Reinsurance Model Law in the United States, to understand how assumption agreements are handled legally.
External Links
For a comprehensive understanding, refer to standard guides and governmental acts:
