assumption of liability agreement
A separate agreement between a company designated as the reinsurer and a
policy-issuing company entered into for the benefit of an insured. It makes
the reinsurer directly liable to the insured in the event of the insolvency
of the issuing company. The reinsurer typically is a licensed company in the
states where the insured requires coverage, thus giving insureds access to an
insurer that is subject to state regulation. Another important provision specifies
that the agreement takes precedence over any other reinsurance contracts or
arrangements between the reinsurer and the primary insurer. These agreements
are almost always made between affiliated insurers.