Ace the 2026 RIBO Exam – Boost Your Insurance Broker Swagger!

The legal process by which an insurer seeks recovery from a third party after it has compensated a policyholder for a loss is known as subrogation. Subrogation allows the insurer to step into the shoes of the insured and pursue claims against the liable third party to recover the amount it paid out in claims. This process is essential as it helps insurers recoup costs associated with covered losses, which in turn can help keep insurance premiums more affordable for policyholders.

In contrast, reinsurance refers to an arrangement where one insurer transfers a portion of risk to another insurer, without the element of pursuing a claim related to a loss already paid. A third-party claim typically involves the action of a policyholder seeking compensation from an insurer or another party, rather than the insurer taking action after paying a claim. The recovery process is a more general term and does not specifically capture the legal rights conferred upon insurers to reclaim funds after a payment has been made.