Treaty Reinsurance
A reinsurance arrangement covering an entire portfolio of risks automatically under agreed terms, without submission of individual risks for acceptance.
businessPublished 2026/06/07Last verified 2026/06/07
FAQs
- What is the difference between a quota share and surplus share treaty?
- A quota share treaty cedes a fixed percentage of every policy in the treaty's scope. A surplus share treaty cedes only the portion of each risk's limit that exceeds the ceding carrier's defined retention, up to a maximum cession — so larger risks cede more and smaller risks cede less.
- How is treaty reinsurance priced?
- Proportional treaty pricing is expressed as the ceding commission (the percentage of ceded premium returned to the carrier for expenses). XL pricing is expressed as a rate-on-line (annual premium divided by the treaty limit). Both reflect the reinsurer's loss cost estimate for the ceded exposure.
- What information must a ceding carrier provide at treaty renewal?
- Carriers typically provide five or more years of loss experience by accident year, premium and exposure statistics, catastrophe model output including probable maximum loss estimates, and any significant changes in the book's composition or underwriting guidelines.
Related Terms
Facultative Reinsurance
Reinsurance placed on an individual risk or policy, negotiated separately for each submission; the reinsurer may accept or decline each risk offered.
Risk Appetite Statement
A formal document articulating the types, volumes, and characteristics of risk a carrier or MGA is willing to write, used to guide underwriting decisions.
Probable Maximum Loss
The estimated maximum loss likely to occur from a single event given the normal functioning of protective features such as sprinklers and fire departments.
Portfolio Steering
Active management of an underwriting book to shift its composition toward more profitable risk segments and away from underperforming ones.