It is important to understand that all insurance companies are reinsured on risks they take. Doing business with a reinsurer allows an insurance company to do more business itself by being able to take on more risk than its balance sheet would otherwise allow. Insurance companies pay reinsurers premiums in the same manner that individuals pay insurance companies premiums.

For example at Lemonade, reinsurance contracts are contracts entered into by Lemonade in order to receive compensation for losses on contracts written by Lemonade (outgoing reinsurance). In Germany, Lemonade has a quota share arrangement in place for all lines of business. Additionally, for liability insurance an Excess of Loss (XoL) contract is in place. Finally, Lemonade has an XoL Treaty on a group level ensuring sufficient coverage.

There is also very good document from lemonade called « lemonade solvency and financial condition repor 2019 » than can be read via https://www.lemonade.com/pdf/reports/lemonade_solvency_2019.pdf. It explains the business and performance, the system of governance, the risk profile, the valuation for solvency purposes and capital management. In the chapter « risk profile », 5 risks are explained: Underwriting risk, Market risk, Operational risk, Liquidity risk and Credit risk.