retrocession

Definitions (2)

1. The purchase of reinsurance by a reinsurance company. This limits the risk that a reinsurance company must face, since it has purchased insurance against an event that might affect a company that it had underwritten. If a reinsurance company continues to purchase insurance it might unknowingly buy back its own risk, known as "spiraling".

2. The voluntary act of returning property which had been previously "ceded" to its original holders. Examples include Washington, D.C. returning land to the state of Virginia in 1847, or the United Kingdom returning Hong Kong to China in 1997.