If it is determined that, under the terms of the insurance policy, the loss is partially covered, the company will negotiate a settlement. The company determines if the claim is covered under the terms of the insurance contract and, if it is, will remit payment for the loss. When a claim is made for a loss payment, a claims adjustor will meet with the claimant to evaluate the loss and make a report to the insurance company. Such re-insurers cannot issue an insurance policy directly to a consumer or commercial entity, since only licensed insurers are permitted to issue insurance policies within the states they are licensed. The company would transfer $4 million of premium and associated risk to a re-insurer. For example, an insurance company issues a $5 million liability policy and desires to hold only $1 million of the risk. They can contract with a reinsurance company to transfer a certain level of premium writings (along with the risk), which would keep the ratio within the prescribed or desired standard. Insurance regulators are interested in the financial health of insurance companies licensed in their respective states for the obvious reason of ensuring that the company will have the ability to pay claims for the citizens of the state in the event of a loss under their insurance policy. One immediate red flag for state regulators reviewing these financial reports is the ratio of written premium to surplus or capital. Each year insurance companies are required to file their statutory financial statements in the states in which they are licensed. To underwrite more than three times, the company's surplus has historically proven to be risky for the continued financial health of a company.

Industry standards define the amount of premium a prudent insurance company can underwrite given its policyholders' surplus. Re-insurers provide insurance coverage to primary insurers by charging a premium rate and providing insurance for specified losses of the primary company. Primary insurers issue insurance policies directly to individuals and businesses. The major players in the insurance industry include primary insurers licensed by the states where they conduct business, re-insurers, surplus lines insurers, rating agencies and regulators.