Extended wait is a reinsurance arrangement under which the reinsurer begins paying disability-related benefits only after the ceding company has paid for a stated initial period. In plain language, the primary insurer keeps the early months of the disability claim, and the reinsurer attaches later if the claim lasts long enough.
How it works
This structure is used to manage long-duration disability exposure. Instead of the reinsurer participating from the first payable month, the treaty says the ceding company retains the beginning of the claim and the reinsurer steps in only after the waiting period has passed.
That means the arrangement is shaped by:
- the length of the retained waiting period
- which disability benefits are ceded
- how claim duration and recoveries are measured
- whether the reinsurance is proportional or excess in design
The longer the wait, the more early-duration claim cost stays with the ceding insurer.
Why it matters
Extended-wait structures let insurers keep predictable short-duration claim costs while buying protection against more volatile long-duration disability claims. They can change pricing, treaty economics, and how claims are administered between the insurer and reinsurer.
Practical example
A disability insurer buys reinsurance that attaches only after it has paid 12 months of benefits on a covered claim. If an insured recovers in month 8, the reinsurer never pays. If the disability continues into month 13, the reinsurer may begin reimbursing benefits according to the treaty.