When a primary insurer cedes part of its risk to a reinsurer, the original insured's rights under the primary policy are:

Why A is correct

Reinsurance is a separate contract between the ceding insurer and the reinsurer. It does not alter the relationship between the primary insurer and its insured, and it gives the insured no direct rights against the reinsurer. The original policy continues exactly as written, with the primary insurer remaining fully liable to the insured for the coverage promised. The reinsurer's obligations run to the ceding insurer, not to the policyholder, and the insured cannot look to the reinsurer for payment. This separation is fundamental to reinsurance: it is a risk-sharing arrangement between insurers that stands entirely behind the scenes from the insured's perspective, leaving the insured's rights under the primary policy completely unchanged.

Why the other options are wrong

• B) The reinsurer does not become the insurer of the original policyholder. The primary insurer remains the issuer of the policy and the party liable to the insured; the reinsurer's contract runs only to the ceding insurer.
• C) The insured's policy is not extinguished by reinsurance, and no new application to the reinsurer is required. The original policy continues in force exactly as written, untouched by the reinsurance arrangement.
• D) The insured's coverage is set by the primary policy, not limited by the reinsurance agreement. The reinsurance contract governs the relationship between the two insurers and does not reduce or cap what the insured can recover.

Memory hook

Reinsurance sits behind the policy; the insured never deals with it.