Reinsurance pools are collective entities formed by multiple reinsurers who collaborate to combine resources to underwrite risks collectively within the pool.

Each participant shares the reinsurance premium, but also shares the risk of having to meet claims payments.

Reinsurance pools are particularly useful for high risk industries like nuclear energy or space launches.

When the potential losses may well exceed the risk appetite of any single insurance company, making it otherwise impossible to ensure the activity, meaning that the building of that nuclear reactor or space rocket would not be possible without reinsurance pools.

Reinsurance pools can also be mandated for critical national insurance programs, such as to ensure against acts of terrorism or flood risk.

Reinsurance pools require different reinsurers to work together to assess underwriting risk, meaning there's an additional benefit of collaboration and sharing best practices amongst participants in the insurance industry.

Concentrating expertise in these high risk areas, it's important to note that the reinsurance pool only acts as a reinsurer taking on risk from insurance policies, which have already been entered into between the primary insurer and the insured party.

However, if the insurer is relying on the existence of the reinsurance pool when entering into the primary insurance contract to be able to offset a proportion of their risk from the primary insurance contract, then the primary insurer will need to know if they're able to offset that risk with a reinsurance pool as a result, the reinsurance pools typically set strict underwriting guidelines so that primary insurers know in advance what types of magnitudes of risks will be taken on by the reinsurance pool.