Many reinsurance investments are not placed with a single reinsurer, but are divided by a number of reinsurers. For example, a surplus of $30,000,000 can be shared by 30 or more reinsurers. The reinsurer that sets the terms (premium and contract terms) of the reinsurance contract is designated as lead reinourer; other companies that enter into the contract are designated by reinsurer. In addition, a reinsurer may accept the entire reinsurance and retroactively pass it on to other companies (in another reinsurance agreement). Voluntary reinsurance operations allow the divested entity to offer a reinsurer an individual risk or a defined set of risks. The reinsurer reserves the right to accept or refuse the risk, just as the insurer has the right to decide to insure an insurance taker. Under an optional agreement, the reinsurer makes its own subcontracting for some or all of the policies to be insured, and each policy is considered a single transaction. Contract reinsurance is one of the three main types of reinsurance contracts. The other two are optional reinsurance and excess reinsurance. Among the many new disaster risk financing opportunities developed over the past decade or two, disaster bonds are the most well-known outside the insurance industry. A lesser known alternative is the Industrial Damage Guarantee Contract (ILW). Unlike conventional reinsurance, where the reinsurer pays part of the primary business`s losses on an agreed-upon formula, ILW is triggered by an agreed branch loss. The contract „guarantees“ that the reinsurer will pay up to $100 million for the buyer`s losses if the sector suffers a predetermined loss, say $5 billion or more.
The CCRIF acts as a mutual that allows Member States to consolidate their risks into a diversified portfolio and acquire reinsurance products or other risk transfer products on international financial markets, which represents savings of up to 50% compared to what each country would cost if it were an individual civil protection purchase. Since a hurricane or earthquake affects only one or three Caribbean countries on average over a one-year period, each country contributes less to the reserve than would be necessary if each country has its own reserves.