Recapture Provision

Insurance companies sometimes offload some of their risk to reinsurance firms. The recapture provision allows them to get it back (if they want it).

You decide that you want to set the record for jumping over flaming school buses on a motor scooter. You buy an insurance policy from Crash Dynamics Inc. that pays for any medical bills (or funeral expenses) that would come about if you were to crash during the stunt. After selling the policy, Crash Dynamics gets nervous. So they go to a reinsurance firm: Got Your Back Corp. Got Your Back takes over half the liability from the policy, and receives half of the premium you paid for the coverage.

A few weeks pass. Then a rep from Crash Dynamics sees you practicing the stunt. You're really good. You jump the necessary distance with ease. Now Crash Dynamics thinks they made a mistake. They think you're probably not going to crash, and they would rather pocket all the premium you paid for the original policy.

Luckily for them, the deal they struck with the reinsurance firm had a recapture provision. The clause basically allows the original insurance company (known as the ceding company in insurance lingo) to declare: "never mind." If they want the risk returned, i.e. if they want to call backsies on the reinsurance deal, they can. They can "recapture" that risk.