Why it is used
The first supports portfolio sharing and capacity; the second protects severity or accumulation above a chosen net position.
Reinsurance Intelligence · Risk sharing
All conceptsProportional vs Non-Proportional
Proportional contracts share premium and losses by an agreed percentage; non-proportional contracts respond when loss exceeds an agreed retention.
Illustrative example
A 40% quota share takes 40% of covered premiums and losses; a 10m excess 5m layer pays covered loss above 5m up to 10m.
Programme questions
- Basis of cession
- Ultimate net loss definition
- Limits, aggregates and exclusions
Educational overview only. Reinsurance effect depends on the complete contract, programme structure, accounting basis, law, facts, and counterparties. The original insurer normally remains responsible to its policyholder.