Proportional reinsurance
In insurance, proportional reinsurance is the division of each loss between the primary insurer and the reinsurer in a fixed ratio.
Accordingly, the gross premium is initially divided in the same ratio, and the reinsurer then pays the primary insurer a reinsurance commission. This is based on the operating costs that the primary insurer incurs in connection with the acquisition and processing of contracts, but actually represents an important, loss-history-dependent price regulation. Proportional forms of reinsurance are comparable to a proportional deductible in primary insurance.
Contract types
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Quota share is the reinsurer's participation in all policies with the same fixed percentage, the quota.
(100% quota reinsurance is referred to as "fronting". The primary insurer transfers 100% of the risk he has been offered to the reinsurer.) - Excess sum insurance (surplus) consists in the reinsurer only participating in those policies whose sum insured or PML ( Probable Maximum Loss ) exceeds a certain excess (maximum). The reinsurer's share of premiums and claims is calculated from the ratio of the share of the reinsured sum (which exceeds the maximum) to the total sum insured.
- Odds excess is a combination of odds and excess - both orders are possible.