State RegulationsFL specificDifficulty 3/5
A Miami policyholder's claim is delayed, and the policyholder knows the insurer has reinsured the risk. Under Florida law, what is the effect of the reinsurance on the policyholder's rights?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
Under the Florida Insurance Code, reinsurance is a contract between insurers: the reinsurer's duty of indemnity runs to the ceding insurer, not to the original policyholder. The policyholder's contract and claim rights remain with the insurer that issued the policy, and the reinsurance is invisible to the insured's enforceable rights.
Why the other options are wrong
- A) The policyholder has no direct rights against the reinsurer; the reinsurer answers to the ceding insurer.
- B) Reinsurance never substitutes the reinsurer for the insurer in the policyholder's contract.
- C) Reinsurance does not require the policyholder's consent and has no effect on the policy's validity.
Memory hook
Reinsurance runs insurer-to-insurer, not to the policyholder.