Meaning of reinsurance?

Reinsurance is a form of insurance that insurance companies purchase to protect themselves from the risk of large losses. In reinsurance, one insurance company (the reinsurer) agrees to take on some of the risk and liability of another insurance company (the ceding company) in exchange for a premium. This helps the ceding company to reduce its exposure to large losses and maintain financial stability. Reinsurance can help insurance companies manage their risk and ensure that they have enough capital to pay claims in the event of a catastrophic event.