Assumption reinsurance is a transfer in which the reinsurer assumes direct responsibility for the original insurance contracts.
Insurance mechanics
The original insurer (cedent) and reinsurer agree that liability, premium rights, and contract duties pass to the assuming party under defined legal terms.
Claims and administration
Policyholders are usually notified, and servicing responsibilities can shift depending on the wording. The objective is continuity for coverage with clarified solvency distribution.
Difference from other reinsurance
Unlike quota-share or excess reinsurance, assumption reinsurance moves legal and operational responsibility rather than only sharing risk.